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What are Legal Contracts?
Legal contracts are legally enforceable agreements between two or more parties that govern what each person can or can’t do. When these legal agreements are drawn up, promises are made between the parties that are upheld in the court of law.
Legal contracts are useful because they protect each party in case of a legal dispute. They also set expectations so that anyone that signs the contract understands their rights and responsibilities within.
Main Types of Legal Contracts in Business Law
Legal contracts play a vital role when it comes to law enforcement. When parties sign a binding contract , it gives law enforcement and the court system a reference document to help make decision.
In law, there are several types of popular legal contracts:
- Service Contract : A service contract is an agreement between a contractor and a customer that covers service, maintenance, and repairs of purchased equipment for a certain period.
- Employment Contract : An employment contract is a contract between an employee and employer that defines rights, responsibilities, and expectations of both parties during an employment term
- Confidentiality Agreement : A confidentiality agreement requires that all parties to the contract agree not to share or sell private information
- Sales Contract : A sales contract is a contract between a buyer and a seller that defines the rules and responsibilities of each party of the agreement
- Independent Contractor Agreement : When a non-employee is contracted by a company to complete a job, an independent contractor agreement a signed contract that explains the work being done, work deadline, compensation information, and roles and responsibilities of contract parties.
- Loan Agreement : A loan agreement is a contract between a lender and a borrower that explains the amount of money being loaned, the repayment schedule, and any associated fees that accompany the agreement
- Partnership Agreement : A partnership agreement is a contract document that explains the management structure, roles, responsibilities, and daily operations of a business partnership
Here is an article where you can learn more about popular types of legal contracts.
How Legal Contracts Work
Legal contracts are essential documents that protect parties when disputes happen and explain certain roles, responsibilities, and terms that each party agrees to.
For a legal contract to be admissible in court, it must meet the following requirements:
- The agreement must not require either party to do anything illegal. If an illegal act is required as part of the contract, the document would be considered unenforceable in the court of law.
- Both parties must agree to all the terms of a signed contract ; this is called mutual assent.
- There must be something of value exchanged that warrants signing a contract. This process is called consideration.
- Both parties must be of sound mind and able to make their own decisions when signing the contract. This also requires each party to be of age to enter into the agreement.
- No party may be forced into signing a contract. If the agreement is not made of the free will of both parties, it constitutes grounds to terminate contract agreements.
If a contract does not meet each of these requirements, the agreement is considered null and void and will not hold up in the court of law. When this happens, the contract is typically immediately vacated and neither party can be held responsible for the terms of the contract, regardless of their wishes.
What is a Breach of Contract?
A breach of contract occurs when one or more parties fail to uphold the obligations that they agreed to upon contract signing. If a rule within a contract is broken, you can usually do one of the following:
- Demand a remedy
- Terminate or amend the agreement
Let’s say you hire a mechanic to fix the air conditioner in your car. When you bring the car in, the mechanic does a quick diagnosis and informs you that the blower motor needs to be replaced and the freon must be recharged. You agree to the work and sign the work contract that allows the mechanic to complete the job.
A week later, you come to pick up your car and realize the air conditioner is still not working. When confronted about the situation, the mechanic states that he was unable to source the blower motor for your vehicle, so he just replaced the freon. However, the contract clearly states that the blower motor was to be replaced.
This situation constitutes a breach of contract.
While your car was in the mechanic’s shop, you were forced to use a taxicab to get around, and you missed hours of work as a result. Because of this, you can sue the mechanic for damages, which would include lost wages, taxi expenses, and a refund for the blower motor part and service.
Your second option is to demand a remedy. This would involve opening a discussion with the mechanic about the problem, demanding that he source the blower motor and fix the air conditioning. You could do this by sending a demand letter from a lawyer.
The last option is to amend the agreement. This might include removing the charge for the blower motor and the related labor from the bill and modifying the contract to include an agreement solely to recharge the freon in the car.
Check out this article to learn more about how legal contracts work.
Image via Pexels by Karolina Grabowska
Examples of Business Legal Contracts
No matter what industry a business is in, legal contracts play a vital role. Signing contracts helps customers and clients understand the services that businesses provide, and for companies, they provide vital protection, as well.
Business legal contracts typically cover one of three areas:
General Business Contract Example
A great example of a general business contract is a partnership agreement. When a company creates a partnership agreement, it defines the roles, responsibilities, and liabilities of partners and shareholders in a company. Some of these usually include:
- Names and personal details of partners
- Decision-making procedures
- Partner contributions
- Profit and loss distributions
- Financial liability
- Tax liability
Employment Contract Example
Employment contracts are important to businesses because they govern the relationship that ownership and management have with the employees of the company. Employment contracts typically cover the following areas:
- Employment duration
- Confidentiality agreements
Sales Contract Example
Sales contracts govern the interactions between a buyer and seller. They are used to ensure that consumers fully understand the deal they agree to and that sellers can be held accountable for any unscrupulous business practices.
Here is a quick overview of what sales contracts can include:
- Selling price
- Product information
- Warranties or service contract details
- Contract duration
- Payment methods
- Sales agreement
- Purchase agreement
Get Help with Legal Contracts
Whether you need to draft a contract, get help with a contract review or get advice on a contract negotiation, there’s one person you can count on to get the job done right: a lawyer. Contract lawyers have special expertise in all areas of legal contracts and can help you make the most of your contracts.
Post a project on ContractsCounsel today to get matched with contract lawyers who specialize in legal contracts.
Meet some of our Legal Contracts Lawyers
I am a corporate lawyer with expertise working with small businesses, venture capital and healthcare. Previously, I worked at large law firms, as well as head attorney for companies. I graduated from Harvard College and University of Pennsylvania Law School. I speak 5 languages (Spanish, French, Italian and Russian, plus English), visited over 60 countries, and used to compete in salsa dancing!
Legal services cost too much, and are often of low quality. I have devoted my law practice to providing the best work at the most affordable price—in everything from defending small businesses against patent trolls to advising multinational corporations on regulatory compliance to steering couples through a divorce.
I am a licensed attorney and a member of the California Bar. I graduated from the University of Dayton School of Law's Program in Law and Technology. I love IP, tech transfers, licensing, and how the internet and developing technology is changing the legal landscape. I've interned at both corporations and boutique firms, and I've taken extensive specialized classes in intellectual property and technology law.
Jo Ann J.
Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.
I am an unabashed contract law geek with a passion for delivering contracts that protect your business within your risk tolerance. Contracts should be clear, concise, and able to be understood by the end user. I promote Plain English contract drafting. I also pay close attention to the boilerplate traps that trip up many agreements. Some of my most frequent drafting projects are entity operating and shareholder agreements, bylaws, asset purchase agreements, commercial leases, EULA, Terms of Service, Privacy Policies, Confidentiality agreements, employment agreements, and more.
I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.
Texas licensed attorney specializing for 20 years in Business and Contract law. My services include General Business Law Advisement; Contract Review and Drafting; Legal Research and Writing, including Motion Practice; Business Formation; Article or Instructive Writing; and more. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.