When you start your own business, you want to do everything you can to make sure you are set up for success. One critical but sometimes overlooked element of your business is your legal documents, such as business contracts. A well-drafted contract is an essential part of doing business if you offer a product or service. Contracts help define partnership terms and protect business assets. However, not every business agreement is a legally binding contract. Here are the elements you need to ensure your contracts are legally binding.
What are business contracts?
Contracts are legally recognized promises. They detail the promise of one person to provide goods or services to another, who promises to exchange an item of value in return. A contract may be written or verbal. However, verbal agreements are difficult to enforce in court because there will be disagreements about the contract’s essential terms When doing business with other companies or customers, it is essential to have all the elements of a legally binding contract in place for it to be enforceable.
Elements of business contracts
Offer and consideration
The action taken by one party in a legally binding contract is called the offer. It is the promise to provide a service, deliver a good, or complete some other task. The vital thing to note is that the scope of the offer is detailed within the contract so that the responding party knows exactly what is being proposed
Consideration is what the performing party will get in return for providing the product or service. Many times, the consideration is monetary. However, financial considerations are not the only type of consideration needed in a contract. The consideration needs to be something of value to the other person, whether it is a review, service swap, or other good. It is essential to include details about the consideration and how payment will be made.
It is not enough for both parties to review the contract to make it legally binding. Both parties need to accept the terms of the contract and take action to fulfill its terms. An off is accepted when the responding party accepts the proposal without any changes or additions. A response that includes any edits is considered a counteroffer. Signing a contract is the most common way to establish contract acceptance. It is important that the contract be clear and include all important provisions. If there is a dispute later, a third party (read: judge) will read the contract and tell both parties what it says, regardless of what they may have assumed. In addition, certain specific types of contracts need to be written down to be enforceable, for example, a contract to sell real property. In most cases, if the proposed agreement is important, it should be in writing.
Meeting of the minds
Not only do both parties need to accept the agreement and take action to fulfill its requirements, but they also need to show that they understood what the terms of the agreement meant. This element of a legally binding contract is called mutuality. This “meeting of the minds” proves that both parties plan to collaborate to fulfill the contract. Signing a written contract is the best evidence of acceptance and mutuality.
Commercial lawyer in Central Florida
Hiring a business attorney to create your contracts is the best way to ensure they are legally binding. At Peppler Law, we assist business owners in creating, negotiating, and counseling in Oviedo and Central Florida. Call us today at 407-792-2773 to see how we can help your business put its best foot forward.