What should new business owners know about contracts?

On Behalf of | Jul 10, 2020 | Business Law

As you create and run your business, you will need to make deals with many different parties. You and your partners will agree on your roles and responsibilities. Vendors and suppliers will need to know how much of a product or service you need and how much you will pay for it. And employees will need to understand their place in the company.

To manage all these agreements, your business will draft contracts. Contracts put down in writing explain what you and the other party expect to get out of your deal. But what should you include in your contracts?

The terms help define responsibilities

A written agreement explains what each party will get out of the exchange. This could be an agreement that business partners will work together for the mutual success of the company. Or it could list the work that a vendor will do in exchange for compensation. Clear writing explaining these roles ensures both parties know their basic expectations.

Without proper consent, a judge can’t enforce the terms

A contract must also have consent from everyone involved. Both parties must be of sound mind and should not feel forced to sign. If one side isn’t serious or can prove undue influence in the agreement, the contract may not be enforceable in a court.

A legally accurate document can hold its weight better

For a contract to have value, it must be legally enforceable. The document itself must have an offer and a place for each party to consent. If it fails to clearly show the consequences for going against the terms, one side could break their promise without threat of a court judgment.

Contracts help protect a company’s success

As you grow and develop your company, you will need relationships with people and businesses to help you succeed. Clearly written and enforceable contracts can help ensure that you have a way to protect yourself from parties that don’t put forth the effort you need for success.

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