Whether you’re a solopreneur, co-founder, employee, or freelancer, the success of every business relationship depends on a well-structured contract. It guarantees that both sides of the contract are protected and that everyone knows their role. Even though it is possible to rely on a verbal agreement, a written contract is usually preferable, particularly in the business world. Another issue is that “he said, she said” ensues in court if one side refuses to uphold the agreement. Therefore, a written agreement that may be used as evidence in court is essential.
With that said, in order for a contract to be legally enforceable, there are a few important aspects, such as the responsibilities of each party, the length of the agreement, and any other pertinent provisions that should be spelled out in the contract. While using contract management software may help you save money and time, if you want your contract to hold up in court, below are six things to bear in mind when drafting a business agreement.
All participants entering into a contractual relationship must have known identities. online forex trading For businesses, it would mean they should provide complete and up-to-date information on their company’s legal name, registered office address, registration number, national tax number, and country of operation. Contracting individuals, however, are required to provide their legal names, current addresses, and taxpayer identification numbers.
Your offer must clearly define what is expected of each side in order to be accepted. An offer has no value from a legal standpoint until the requesting party accepts it. The offer is also open to modification, withdrawal, or rejection after it is received. In the event of a counteroffer, the initial offer is null and void, and further negotiations between the parties are required.
When an offer is made, acceptance often follows quickly after. For the acceptance to be valid in court, the parties must agree to all the terms and conditions of the contract. They must also express it clearly. Let’s say, for example, that your solar panel needs replacing and your technician calls to let you know the cost will be $800. If you accept his offer, you must express it legibly in the form of a valid signature in the case of a written contract. Keep in mind that you haven’t accepted the offer, and the contract is not legally binding if you tell him you need a day or two to think about it.
Duration of an Open Offer
The time period for an offer remains valid is crucial to the contract. An individual who makes an offer isn’t obliged to keep it open indefinitely. However, offers are still valid even if they aren’t accepted right away. The lifetime of an offer directly correlates with its specified timeline; if unspecified, it continues until a “reasonable” period elapses. A reasonable time takes into account factors like your industry niche, contract subject, and historical interactions between respective parties, lending considerable room for interpretation and making it wise to include expiry dates on offers.
Imagine you’re an online fashion marketplace, and a manufacturer extends an offer to send you a shipment. Now the offer may stay live for weeks or perhaps months, as governed by market norms. However, accepting the offer a year later and expecting the manufacturer to honor it is probably unrealistic since the offer will have expired by then.
Forging a business agreement necessitates an unambiguous termination clause. This section should list the circumstances that might cancel the contract and the requirements for invoking it. Incorporating these details upfront helps both parties understand the situations and criteria under which they can dissolve the agreement, thereby averting conflicts or confusion. A well-written termination clause may also provide both parties peace of mind by outlining the standard procedure for going about it should the need arise.
A contract is enforceable by law only when something of value is exchanged between the parties. Any contract, at its core, requires the sale and purchase of products or services, and thus, the parties to a contract may agree to trade money for goods, services, or the use of property. There might be a promise to pay in the future or a promise to pay now, but there must be a monetary consideration associated with the contract for it to be valid. If, however, a monetary exchange is not involved, the parties’ consideration must be something a court would find to be of value.
Understanding the necessary components of a contract is essential in order to ensure it is legally enforceable. Individuals and businesses can lessen their exposure to legal risks by having a solid contract in place. The points listed above are key elements of a valid contract. Make sure to include them in your next document.
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.