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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 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:

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:

  1. Offer
  2. Mutual consideration
  3. Transaction details
  4. Competency
  5. 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:

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:

  1. Creating a paper trail of the transaction or relationship
  2. Preventing and mitigating conflicts and risks
  3. Promoting organization compliance with documentation
  4. Fostering a sense of communication and collaboration
  5. Protecting the company’s values as a brand
  6. Increasing efficiency throughout the entire company
  7. Ensuring that people understand expectations
  8. Safeguarding you from other’s liabilities
  9. Making yourself an attractive entity with which to do business
  10. 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.

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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.



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