Business Law

Good Contracts Make Good Business Sense

Contracts are the basic building blocks of business. Many parts of your business operations, from opening a business bank account to ordering inventory, are based on agreements between you and other parties. Knowing the features of a valid and enforceable contract can protect your business - preventing disputes up front and enforcing your agreement when things go wrong.

A Valid Contract Can Be Oral or Written

A written or oral agreement between two or more parties can create a valid contract. The details of an oral contract can be hard to prove, however, so it is advisable to put all of your important business agreements in writing. In fact, the law requires that certain types of contracts must be in writing to be enforceable precisely because the terms of an oral contract can too easily be disputed.

Parties to a Contract Must Agree on Its Terms

You can't be forced or tricked into entering a business contract. Parties to a contract must intend to enter into a binding contract and agree on its terms. Courts examine the form of the agreement to see if one party made an offer and the other party accepted the offer. The court also determines if there was an exchange of something valuable that demonstrated the intent to enter into a binding contract.

Parties Must Have Capacity

The law prevents you from entering into contracts with certain categories of people. Only adults can sign contracts, for example, so a court can cancel any business contract made with a minor. The contract may also be unenforceable if the other party was mentally incompetent when the contract was signed.

Further, you must make sure that the person signing the contract on behalf of a business has the authority to bind the company to its terms. You can't enforce a contract against another business if the person who signed the contract was not authorized to act for the company.

Contract Clauses Can Protect a Business

A business contract often contains more than just the basic terms of a single transaction. Most businesses develop standard contract language that is included in all contracts. This language protects the business if the other party fails to perform or shields it against certain undesirable behavior.

A common type of contract clause, for example, requires both parties to submit disputes to arbitration. This clause can save your business a lot of money in legal fees.

A Business Lawyer Can Help

The law involving business contracts is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a business lawyer.

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This article was verified by:
Robert H. Ellis | May 26, 2015
121 West Forsyth Street, Suite 800
(904) 342-6009 View Profile

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