Reaching an agreement for goods or services is essential for every business. Without these exchanges, companies cannot function. Dependence on things like inventory, supplies and equipment makes business contracts a fundamental piece of every company’s solid foundation.
When it comes to drafting a contract, it must be fair and clear. It also needs language that makes it enforceable should one of the parties fall short of promises. Discover three elements of a contract that every business contract should include.
- The parties must both agree
A deal is worthless if the parties do not agree on the terms contained within it. Those involved in the contract need to sign off on the transaction and agree to abide by the responsibilities each must perform. Keeping a deal in good standing means that each party takes required actions timely and according to the specificities outlined in the document. By stating their mutual agreement, the parties acknowledge that they each know what they must do and when.
- The consideration for the action is clear
A business contract is nothing without money exchanging hands. This consideration may deal with the purchase of property, goods or services. Even if the amount is nominal, the document must clearly state it. The entity responsible for paying it must check to ensure that the amount is correct. A typographical error in this crucial element may cost more time and money fixing it after contract signing.
- The actions contemplated must abide by pertinent laws
One of the most critical aspects of a contract is the legality of the action it details. Not only must the terms abide by the laws of the state in which the parties reside or the transaction occurs, but they must also contemplate a legal transaction. For example, a trucking company cannot agree to provide illegal goods to a business owner. If one part of the transaction involves criminal or illicit activity, the contract is not enforceable.
Contracts are worthless without proper drafting and execution. Make sure that the agreement is legally binding before signing to protect business and personal interests involved.