The importance of contractsFebruary 22, 2016 2:32 pm Leave your thoughts
While its nice to think that most business can be conducted with a simple handshake agreement, the truth is that without an official contract in place, your enterprise remains vulnerable. Contracts are voluntary legal agreements — either written or oral — between two or more parties that outline each party's rights and obligations, and often spell out the terms of what will occur if the agreement is violated.
"Contracts are voluntary legal agreements — either written or oral — between two or more parties."
While an oral agreement can be legally binding, it is best to get all contracts in writing. This makes them more easily enforceable in the event of a violation. This makes it one of the most valuable tools when it comes to dispute resolution and protecting your assets.
What makes up a contract?
A contract is primarily made up of an offer, acceptance of that offer and a consideration.
- The offer is the work that the parties are looking to see performed via the agreement. It is spelled out in detail, including expected results, so that there is no confusion about what is being arranged.
- The acceptance of the offer means that both parties to acknowledge that the offer has been agreed upon. It delineates any other conditions related to acceptance of the offer (non-disclosure, non-compete, etc.).
- Consideration means remuneration — or payment — with conditions.
Contracts may also spell out the specific methods by which they can be changed, amended or have addendums put in place after the fact.
How are contracts decided?
Contracts are typically drawn up by legal council from one of the parties looking to enter into an agreement. Before a contract is drawn up, there is a negotiation period which can last for days, weeks or even months, depending on the contract and the contractual responsibility of each party.
What kind of contracts are there?
Contracts can take on many forms for an almost infinite number of possibilities. Some of the common ones include:
- Fixed resource costs. This is an agreement for one party to provide another with certain resources at a fixed price, making it impossible to raise or lower the price without a modified agreement.
- Employee agreements. Most businesses have employment agreements issued to potential employees that spell out broad conditions on the hiring and firing of employees, and the benefits that employees qualify for aside from salaries. These agreements are often subject to government regulation, making legal council key when drawing them up.
- Confidentiality and non-disclosure. Often, agreements where trade secrets are involved are built around a certain degree of secrecy. A contract can specify that the parties not discuss the terms of the deal, with penalties written in violated.
The most important thing when hammering out a contract is to have a qualified business attorney on your side. The Law Offices of Donald W. Hudspeth, P.C. have the experience you need to ensure any agreement you enter into is one that benefits you and your venture partners.
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