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Need help with a Business Contract?
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 legal contracts, are legally binding written agreements between two or more business parties. They are enforceable in a civil court of law as long as they follow specific contract laws. There are several business contract types that businesses need and may use on a daily basis 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.
Types of business contracts include:
- Sale contract
- Service contract
- Employment contract
- Commercial lease
- Business partnership agreements
- Joint venture agreements
The virtual 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:
- Mutual consideration
- Transaction details
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
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.
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. These cases are challenging to prove.
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. Online templates are recycled from other transactions that may or may not be legally binding or enforceable in your geographic location. Keep in mind that a contract is only as good as the language and provisions it contains.
Follow these critical steps on how to write a business contract:
- Step 1. Obtain as much relevant information about the transaction as possible
- Step 2. Start the negotiations with gatekeepers and decision-makers
- Step 3. Identify the parties to the contract correctly
- Step 4. Ensure that you put every provision and stipulation in writing
- Step 5. Do not use a template from another transaction
- Step 6. Write the contract in the simplest terms possible
- Step 7. Flesh out the payment terms and conditions in detail
- Step 8. Decide if you want to use courts or alternative dispute resolution
- Step 9. Determine which reasons you will accept a contract cancellation
- Step 10. Incorporate a non-disclosure clause to keep the relationship private
- Step 11. Make a note of the contract expiration date
- Step 12. 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 .
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
I run a small law firm in Pasadena, CA. I have been practicing for almost 10 years and the other attorneys at my firm each have 12+ years of experience. We focus on business and employment law, protecting and defending business owners. While my clients are all sizes, I particularly enjoy helping smaller companies and individuals manage their legal needs without the high price tag.
I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.
I assist individuals and businesses across the state of Florida with contract drafting, contract interpretation, and issues that may arise because of contract terms, including demands (cease-and-desist letters) and litigation. I have experience with general service contracts, non-compete agreements, settlement agreements, and many other contracts. Please reach out if I can help you with a contract-related project!
Brianna is a well-respected attorney with a juris doctorate degree in law from Touro College Jacob D. Fuchsberg Law School and bachelor’s degree in Business Administration and Management from Dowling College. Since becoming an attorney, she has practiced in various areas including business law, real estate, employment law, estate planning, and more. Brianna has very broad and extensive business experience; She is an entrepreneur and co-owner of a manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer/General Counsel and Human Resource Manager for the company. She has been involved in business for over 15 years, thus she offers a very unique skillset to her clients; not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint but be of consequence in business. She conducts risk assessments and minimizes client’s risk and exposure to potential liability. Additionally, she specializes in drafting and negotiating agreements. Negotiating is a passion of hers; in law school, she was a member of the Alternative Dispute Resolution Society and won the intraschool negotiation competition. Brianna believes in quality over quantity. She treats every client as a top priority; thus she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client.
Experienced attorney focusing on estate planning, probate administration, business formation and counseling, and consumer bankruptcy.
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.