Contracts, which define most business relationships, are written or verbal agreements that carry the weight of the law. While certain contractual agreements are best reviewed by a qualified business attorney, it is important that small business owners and senior managers acquire at least a basic understanding of contract law.
Business Forms and Recruitment Basics
This section provides an overview of contract law and the different types of contracts and forms commonly used by companies, including the basic aspects of non-compliance with claims for breach of contract, contracts that must be in writing, legality of international contracts, contracts and forms by the industry, and much more.
Overview of contract law
Almost all business transactions involve contracts, sometimes even when the terms are not written. When a company accepts an exchange of anything of value, it is generally subject to contract law. Common business contracts include employment contracts, purchase orders, sales invoices, and partnerships with other companies. For a contract to be considered valid and therefore legally enforceable, it must include the following elements:
- The parties to a contract must be competent; Although minors can enter into most contracts, they can also cancel them (in most cases) before reaching minority age
- There must be mutual agreement between the parties to a contract, without coercion
Some verbal contracts are enforceable, but most must be in writing and signed by all parties. In any case, a written contract will better protect the interests of the parties than a verbal agreement (even if technically enforceable). Although an attorney is not required for all contracts, the potential headaches caused by a poorly drafted contract can end up costing much more than the services of an attorney.
Compliance with commercial contracts
If there is a disagreement over the terms of a contract, or if one of the parties is simply behind in its contractual obligations, the parties can seek a remedy through the court system. When one of the parties fails to fulfill its end of the bargain, it is said to have “breached” the contract. Disputes involving an amount of money below the legal limit (roughly in the $ 5,000 range, but varies by state) are typically handled in small claims court.
Parties to a contract dispute are often encouraged to resolve their issues through mediation or binding arbitration before filing lawsuits.
Drafting of a commercial contract
If you choose to write your own contracts, you will want to pay attention to the details; seemingly minor things can create big problems. They do not have to be written “legal” as long as the terms are used correctly from a legal perspective. In fact, it is always better to use relatively simple and easy to understand language. But contracts must be as detailed as possible, with the rights and obligations of each of the parties clearly and unambiguously.
Important contractual terms include (but are not limited to):
- Obligations and rights of each party
- Relevant dates
- Relevant prices, dollar amounts, etc.
- Payment conditions
- Disclaimer
- Limits of liability
- Applicable law (where applicable)
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