The average contract lawyer’s salary in the US is $124,982, highlighting the importance companies place on having water-tight contracts.
However, there is a lot to know about business contracts as they can contain many crucial elements. If you were to overlook or misunderstand vital clauses in a contract, this could have severe consequences for your company.
This in-depth guide will take a closer look at what to consider when using business agreements.
Let’s find out more.
Types of Business Contracts
There are so many different aspects to running a business that it would be impossible to use a single contract. There are an enormous number of different agreement types, but here are some of the most common.
Employment Contracts
Employment contracts are used to protect both a business and its employees. There are usually standard terms such as what hours staff members are required to work and how much they will be paid. You’ll also find information regarding what employees should do if they are sick and their entitlement to vacation time.
Should an employer or employee break the terms of this contract, there could be legal ramifications. This could include a worker being dismissed, or a company being pursued for compensation.
Sales Contracts
Sales contracts are essential when companies are buying or selling products and services. A typical agreement will describe what is being bought or sold, how much it costs, and the terms for returns or refunds. The contract could also include details regarding the terms of payment and any penalties that may be applicable should one party fail to honor the agreement.
As businesses frequently spend large amounts of money buying goods and supplies, these contracts can provide much-needed peace of mind.
Loan Agreements
A company may need to borrow money for reasons such as increasing cash flow or expanding the business. This could mean they have to ask for a loan that they will repay in installments or in full at a later date.
While many business owners will approach a bank for a loan, there is also the option to borrow from an online lender. Alternatively, they could borrow from other businesses or people they know such as friends or family.
In all cases, the loan contract should specify the amount of money being borrowed and how and when it will be repaid. The applicable interest charges should also be noted, along with what will happen should the borrower default on the loan.
Confidentiality Agreements
Businesses will want to protect their interests, and this could involve asking parties such as employees and sub-contractors to sign confidentiality agreements. These documents forbid a person from disclosing certain details that could harm the company. This may include banning an employee from discussing proprietary information related to how a company makes a product.
Should a person break a confidentiality agreement, they could have to pay damages to the business.
What to Include in a Business Contract
Since business contracts are legally binding, it’s critical to hire a contract lawyer that specializes in corporate legal services. Qualified lawyers can write and review your agreements, making sure they contain key elements. Although these documents can be incredibly complex, here are some parts that should be in all contracts.
Offer
The offer explains what a business will do for its client in exchange for something else, usually payment. It’s important that the offer is clear and that there is no doubt about what the customer will receive.
Consideration
The consideration is what is being exchanged between the two parties. A common trade is when a company provides goods or services and a customer agrees to pay money.
Acceptance
If a client is happy with an offer, they can accept it. This may be in verbal or written form. However, many businesses will wait until they receive written confirmation before agreeing to provide a service.
Identification
Both parties should be identifiable in the contract. You can include your name, address, and company name. Clients should provide their details so there is no ambiguity as to who is agreeing to the terms.
When Might a Business Contract Be Void?
There are times when contracts might be void. This means you will not be bound by the terms of the agreement.
Missing Elements
Should any core elements such as offers and acceptances be missing from contracts, they may be invalid. This can be an expensive issue for a business if they have provided a service but have not yet been paid.
Lack of Capacity
A party may lack the capacity to sign a contract if they are mentally ill. Or they might not be fit to agree to the terms if they are under the influence of alcohol.
Both Parties Agree to Cancel the Contract
If you cancel a contract, this may release both parties from their responsibilities. This could happen if a business wants to help a customer who is struggling to pay their bills and they agree to void the agreement.
Make Sure Your Business Contracts Are Legally Binding
Business agreements play a crucial role in commerce, and it’s critical to make sure you understand the terms of each contract. Make sure you learn about the various types of company contracts and when each one is necessary. You should also ask a legal professional to ensure your business contracts are legally binding and provide adequate protection for your company.
Before you rush off to review your business agreements, check out more of our informative blog posts.
