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If you run a business, you will need to engage in the drafting, negotiating, and signing business contracts routinely. Business contracts encourage compliance, confidentiality, and cooperation between two parties in a transaction. You must utilize them regularly as a business owner or manager.
Unfortunately, poorly worded or written contracts may not serve their intended purpose, which can nullify the process in the first place. Instead of leaving your business exposed to liability, consider everything you need to know about a business contract by reading the article below.
What is a Business Contract?
Business contracts, also known as business agreements, are legally binding written agreements between two or more business parties. They are enforceable in a civil court of law if they follow specific contract laws and other enforceability factors. There are several business contract types that businesses need and may use daily during normal operations.
Becoming familiar with them can help you understand which documents and agreements you need to have in place to run a legally and financially healthy company.
Types of Business Contracts
The term “business contract” is a broad term that describes any legally binding document used to govern transactions in a business context. The contracts used will vary according to state, country, industry, and transaction type. However, some contracts are used more often than others.
Examples of a few business contracts include:
- Sale contract
- Service contract
- Employment contract
- Commercial lease
- Business partnership agreements
- Master services agreement
The sky is the limit when it comes to the common types of business contracts we regularly use today. Markets have also supported the regular use of digital contract signing and transmittal. However, you will want to make sure the method at which you are signing contracts digitally is compliant with eSignature laws.
Key Parts of a Business Contract
What makes a business contract, well, a business contract? While there are common provisions that you can find in every document, overarching principles and legal philosophies design them. Essentially, a business contract indicates that something of value was traded and that all parties agreed to the terms.
Key parts of a business contract include:
- Offer
- Mutual consideration
- Transaction details
- Competency
- Acceptance
When signing a business contract, it is only as good as the language it contains. If your business contracts do not have the critical parts described above, you will experience legal issues in a court of law should you or the other parties raise a dispute. Ensure that you incorporate the essential parts as well as the standard clauses found in business contracts.
Common Clauses in Business Contracts
Business contracts vary in terms according to the transaction, size, payment terms, and other elements. You can organize and manage these terms by breaking your business contracts up into common clauses. This strategy will ensure that your arrangements are precise and that all principals can quickly locate the information they need.
Common clauses in business contracts include:
- Arbitration clause
- Choice of law clause
- Confidentiality clause
- Definitions clause
- Indemnification clause
- Severability clause
- Warranties
A well-written business contract is essential to uphold the legality and enforceability of the above-referenced provisions. Small business law and business contracts go hand-in-hand, which means you need to support both of these components. Start with a clear purpose in mind when drafting your business contracts.
Visit ContractsCounsel’s Contract Clauses resource guide.
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Purpose of a Business Contract
The purpose of business contracts is to protect the legal rights of you and your company when engaging in business relationships and transactions. If you do not have a written agreement in place, you open your organization to a host of legal issues. Consider some critical reasons as to why you should make business contracts a part of your regular practice.
Reasons to use business contracts include:
- Creating a paper trail of the transaction or relationship
- Preventing and mitigating conflicts and risks
- Promoting organization compliance with documentation
- Fostering a sense of communication and collaboration
- Protecting the company’s values as a brand
- Increasing efficiency throughout the entire company
- Ensuring that people understand expectations
- Safeguarding you from other’s liabilities
- Making yourself an attractive entity with which to do business
- Offering proof of the business contract’s particulars
There is no question that business contracts serve vital purposes. If a legal question or dispute crops up, you will have a document that both of you signed regarding the terms and conditions of the transaction. It is harder to refute or deny proof when a judge or jury is staring at it.
If you have legal questions, visit ContractsCounsel’s Free Q&A Forum.
Avoid Oral Contracts
Lastly, avoid using oral contracts. While they are enforceable in many states, disputes generally turn into a legal fight involving your word against someone else’s. Written contracts are much easier to prove and it is always advisable to get contract terms in writing to avoid potential disputes.
Get your business contracts in writing so that they offer you the intended protections you need.
Image via Pexels by Christina Morillo
How To Write a Business Contract
While it may be rather tempting to download a contract template online, you will serve yourself and your company well by following through on the process more professionally by hiring a lawyer. Online templates can be recycled from other transactions that may or may not be legally binding or enforceable in your geographic location without customization. Keep in mind that a contract is only as good as the language and provisions it contains. There are some reputable online template services, but most transactions require customization to make sure the contract fits your purpose.
Follow these critical steps on how to write a business contract:
- Obtain as much relevant information about the transaction as possible
- Start the negotiations with gatekeepers and decision-makers
- Identify the parties to the contract correctly
- Ensure that you put every provision and stipulation in writing
- Do not use a template from another transaction
- Write the contract in the simplest terms possible
- Flesh out the payment terms and conditions in detail
- Decide if you want to use courts or alternative dispute resolution
- Determine which reasons you will accept a contract cancellation
- Incorporate a non-disclosure clause to keep the relationship private
- Make a note of the contract expiration date
- Provide signature and datelines with plenty of space
As you can infer, there are several steps that you may go through to achieve the best possible result for your business contracts. You are also likely to face some tough questions as crucial issues arise. Ensure that you get help with business contracts from a legal professional directly.
Here is another article on how to write a contract.
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Get Help with Business Contracts
If you need to get help with business contracts, start by speak with business contract lawyers. They can help you negotiate the terms and conditions of your deal by drafting a legal agreement that makes sense for your situation. When legal disputes arise, they can also stand by your side and mount a defense or offense against the allegations at hand.
Compliance Is Critical
Your business contract lawyers will also guarantee that they are compliant with your geographic region. Some states and countries require contracts to contain specific provisions for enforceability. Business contract lawyers will guide you through compliance measures as well.
Meet some of our Business Contract Lawyers
Mark P.
www.parachinilaw.com I represent a diverse mix in a vast array of specialties, including litigation, contracts, compliance, business and financial strategies, and emerging industries. Credit for this foundation of strength goes to those who taught me. Skilled professors and professionals fostered my powerful educational and professional background. Prior to law school, I earned dual Bachelor’s degrees in Business Administration & Accounting from Peru State College. I received a Master of Business Administration degree from Chadron State College. My ambitions did not stop there. While working full time as a Senior Accountant for the University of Missouri, Columbia, I achieved the lifelong goal of becoming a licensed Certified Public Accountant (CPA). Mizzo provided excellent opportunities and amazing experiences. Managing over $50M in government and private research funding was a gift. As a high ranking professional in the Department of Research, I was given priceless insight into the greatest scientific, journalistic, medical, and legal minds in the world. My passion for successful growth did not, and has not stopped. I graduated summa cum laude (top 3%) with a Doctorate in Law, emphasizing in urban, land use and environmental/toxic tort law from the University of Missouri, Kansas City. This success lead to invaluable experiences of serving as Hon. Brian C. Wimes' judicial clerk for the U.S. District Court for the W. D. of Missouri, as a staff editor/writer for UMKC Law Review, and as a litigation and transactional attorney with Lathrop GPM (fka Lathrop & Gage). My professional and personal network is expansive, with established relationships throughout the U.S. and overseas. Although I engage in legal practice all over the country, I maintain law licenses in Missouri, Kansas, and Nebraska. Federally, I hold licenses in the W.D. and E.D. of Missouri and the District of Nebraska. To offer extra value, efficiency, and options, I maintain a CPA license and am obtaining a real-estate brokerage license.
Rachel C.
Contract attorney who enjoys empowering individuals and businesses with contracts that stand as a fortress against potential disputes and uncertainties. Find peace of mind with prepared agreements ensure that your agreements are enforceable and aligned with your long-term objectives.
Robert Jay H.
My Legal career hasfocused on representing businesses (corporations and limited liability companies) as general outside counsel. In this capacity, I have drafted a broad range of legal documents as well as analyzed proposed agreements drafted by the other party's attorney to the agreement for the pupose of determining the risks to which my client would be exposed. I maintained the client's minute book if no one in-house was available for that task. Additionally, if rquested, I served as a general advisor to the client's executive offers and to its Board of Directors.
Michael C.
I offer top-tier legal expertise in startups, corporate governance, and general legal research. As a professor and published author of research articles and conference presentations, I have established myself as a legal expert, writer, and scholar. My strong research skills and innovative thinking make me a highly capable business consultant, legal adviser, and copywriter. Currently a member of the Minnesota bar. Recent freelance projects include business plans, contract drafting, legal advisory memoranda, due diligence, pre-trial motion practice, and discovery review.
Fabian G.
Fabian graduated with honors from the University of Miami School of law, where he served as the articles and comments editor for the law school's Race and Social Justice Law Review. He received the John F. Evans Memorial Scholarship Award for excellence in the university's Litigation Skills Program and the HOPE Pro Bono award for completing more than one hundred (100) pro bono hours. Additionally, he received the CALI Excellence for the future award in Sports Law. He focuses his practice on corporate, real estate and immigration matters. Fabian has experience representing luxury hotel owners and operators in connection with the drafting of hotel management agreements, restaurant license agreements, and complex restaurant leases for domestic and international projects including: Nobu Tulum, Nobu Punta Cana, Nobu Orlando, Nobu Chicago and the Nickelodeon Hotel in Riviera Maya, Mexico, among others. He has represented clients in the commercial real estate industry in connection with the drafting of purchase and sale agreements, promissory notes, and mortgages. Lastly, Fabian routinely counsels corporate clients in connection with the drafting of articles of organization, operating agreements, and other documents related to acquisitions, restructurings and investments.
May 9, 2023
N'kia N.
I am a business law attorney with substantial experience with contracts and contract disputes. I support both "professional" services provider (such as consultants and advisors) and "creative" services providers (such as creators and ghostwriters). Future-proof your business with contracts that are customized to your unique goals. My special interests include services agreements, employment agreements, severance agreements, independent contractor agreements, termination agreements, restrictive covenants (such as confidentiality agreements/non-disclosure agreements, non-competition agreements, non-solicitation agreements, and non-disparagement agreements), alternative resolution agreements, and settlement agreements. *** Any reference to a "FREE consultation" is for a "Discovery Call" (legal information or information about my services). For legal advice, please schedule a "Strategy Call." [All calls are by appointment.] [I am not currently accepting new clients for disputes related to construction contracts or defects, real estate transactions, commercial or residential leases, or employment.] Address is for mail only.
May 9, 2023
Venus C.
Venus Caruso is a Florida-based attorney who has been helping companies and individuals with their contract needs for over 19 years. She leverages her 10 years spent as a complex commercial litigator and 7 years spent as in-house legal counsel to help clients with their contract needs, whether it’s preparing a contract or providing feedback and redlining. Some types of contracts that Venus can help you with include NDAs, digital agency agreements, marketing agreements, employment agreements, Florida LLC operating agreements, software development agreements, non-competition and non-solicitation agreements, non-circumvention agreements, sales rep agreements, software agreements, SaaS agreements, contract amendments, and termination of contract agreements.
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Business Contract
New York
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Will be happy to call and discuss. I have a business law matter I need assistance with, I was recommended to your firm by the bar association. Kindly confirm if you are available to handle such matters. Thank you, Paul Gam.
Donya G.
Hi Paul, It’s great to hear that we were recommended. I would be happy to help with your business matter. I am a business attorney with over 20 years of legal and business experience. I generally serve as General Counsel to small business clients end work with them on resolving their issues. When can you get on a call? We can schedule a free 15 min consultation to discuss. You can contact me on Contracts Counsel. I have some time today, Friday February 18th and also Monday or Tuesday next week. I look forward to hearing from and working with you. Donya Gordon
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Business contract with a termination fee?
I am currently in the process of starting a business and I have been presented with a contract that includes a termination fee. I am not sure what obligations I have with respect to this fee and I would like to know what kind of legal implications I may be subject to in the event of a termination. I am also interested in exploring the potential for negotiation of this fee in order to ensure that I am not overpaying for services that I may no longer need.
N'kia N.
A termination fee is a payment that one party to a contract pays the other party for terminating the contract before it expires. The general purpose is to compensate the non-terminating party for resources used and/or opportunities missed as a result of entering into the contract that is then terminated early. A well-written termination fee clause will typically include the exact fee to be paid or, if not exact, a clear explanation of how the fee is to be calculated. Additionally, it will include a timeline for the payment(s). Unless the terms of the contract are otherwise contrary to law, the terminating party is presumed to be responsible for paying the stated sum at the stated time. While it is common for a business contract to contain a termination fee clause, a termination fee that is unreasonable under the circumstances is at risk of not being enforceable. However, disputing a termination fee clause can require a lot of the parties' time and money. Before signing a contract with a termination fee clause, all of the parties should be sure that they understand and agree with the clause. If you are considering signing a contract with a termination fee clause, you might have an attorney review it before you sign it. The attorney might even be able to assist you with negotiating changes, if needed or helpful.
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Business contract for temporary projects?
I am a freelancer looking to take on temporary projects. I am currently in the process of creating a business contract for these projects, but I am unsure of what to include in the contract or what rights and responsibilities I should include for both parties. I would like to understand the legal implications of such a contract and ensure that I am adequately protected.
Eddy M.
You should have a simple template that can be used for multiple projects. The key terms to include are: - Contract period - Your specific responsibilities and deliverables - Fees and payment terms - Who owns the work - Non-disclosure clauses - Termination rights (for both parties) if things don't go well - Indemnification (i.e. if something goes wrong, who is responsible for what) This can be a relatively simple contract that can be revised quickly and for multiple clients. One thing to note is that companies will typically prefer to use their own vendor contracts, so you might end up having to review and use their contract instead of yours.
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Consultation about theater covid policy
We booked a local theater to put on performance. At signing of contract, there was no covid restriction. However, recently theater imposed a restriction to audiences who come to the show that they either vaccinated or show negative PCR test results within 72 hours of show. This new policy hurt our ticket sale badly. Please note, this is theater initiated policy, not from government.
Donya G.
You will need an attorney to review your agreement with the theatre in order to properly advise you based on the contract. As such, you will need to post your project on the website Here are the steps you need to take to accomplish this 1. Post the job you need to get accomplished – for example “ I am looking for an attorney to review an contract with a theatre to determine my options -------------“ 2. Once posted, attorneys on the website that are interested and qualified will respond to your posting 3. Choose an attorney/s based upon their qualifications and cover letter to have a quick call so that you can decide who you would like to hire. 4. After talking with attorneys, choose who you will decide to proceed with. Remember to discuss the cost of the project as well as how long it will take to be completed as well as when payments will be made. 5. Once you have decided who to hire, click “HIRE” and that attorney will now be hired by you. Donya Gordon, Esq.
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can I file a 2nd UCC Financing Statement within 3 years?
I recently filed a UCC 1 online with the NYSDOS. I need to file a more perfected UCC 1 by mail. And if I can will the 2nd filing supercede the 1st one?
Jane C.
You can amend your filing. Please see this link https://dos.ny.gov/file-amendment.
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