6 Basic Elements Of A Good Business Contract
Nearly every business enters into a fairly large number of deals over its existence. To protect your company's rights, though, it's critical to handle the basic elements of each contract the right way. A business attorney will likely tell you to pay attention to the following 6 aspects of a deal.
1. The Offer
Every contract, written or unwritten, has to include some form of offer. If a bakery shop owner puts out donuts with a certain price per dozen, for example, that's at least one offer they're making.
Similarly, a second party has to accept the contract for it to be legally binding. If you go to a rental car company for a vehicle, for example, you're not obligated to accept the contract. They have to give you a car, and you'll have to provide them with good compensation. That means you must give them something of value in exchange for something else of value.
2. Limits
It's not a good idea to leave the expressed timeframe for a contract open. A business lawyer usually inserts a clause into a contract sunsetting it. If you signed a deal that never had a termination date, you might suffer through years or even decades of obligations you can't escape. Always make it clear when a contract starts to start the clock on the sunset provision, too.
3. Scope
Where a contract applies is as important as when it applies. The scope can cover regions or jurisdictions, and it may even cover the idea of specific industries. A company with a good UX/UI designer, for example, might limit that person's ability to compete against them for two to five years.
4. Enforceability
Especially with large or pricey contracts, it's smart to include enforcement mechanisms. These can include something like demanding a partial refund if certain terms aren't met. The goal is to ensure all parties to the deal fulfill their obligations.
5. Assignment
Specific tasks from the contract need to flow from it. Clearly state who will do what, and also establish who is liable for specific activities. If a contractor wants to designate tasks to subcontractors, there should also be a third-party assignment clause to make this possible.
6. Venue
A contract is usually signed in some place or based on one state's laws. Including a venue clause will ensure that any potential legal disputes are litigated at a place of your choosing. This can radically reduce the uncertainty that presents in nearly all deals.
For more information, contact a business attorney.
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