Contracts are an essential component of any business, particularly if you have established relationships with other businesses or clients. When devising a strong business contract, the focus should be on reducing risk and ensuring all parties fully understand their responsibilities. It helps to have legal counsel available to assist you, to review the contract and confirm that there is nothing missing or no mistakes. Understanding what the components of a strong contract are can help you avoid common pitfalls that business-minded people make all the time. For details on how to write a strong contract, consider reading the content below and then reach out to a business lawyer near you for further assistance.
Contract Starts with Offer
A legally valid contract usually requires certain elements to exist. Depending on the agreement being established, there may be specific nuances that apply to the contract. But generally, a contract begins through an offer by one party either verbally or written. If the offer was verbal, it is strongly recommended that it be put in writing. If there is no document that goes along with a verbal offer and agreement, there is a higher likelihood that there will be issues in the future, even if all parties have the best of intentions.
Consideration and Terms
Every contract must have consideration, and may look a little different depending on the situation. With a contract, consideration exists in the obligations and rights of each party involved. Examples of consideration include a receipt of interest (money, property, company ownership, real estate, etc.) and the power or right to do something. Additionally, the consideration must be mutual, where each party has power to act under the contract. If there is no mutuality to the contract, it may not be legally enforceable.
Acceptance of Offer
Another element of a strong contract is the person receiving the offer must accept it, or negotiate until the terms are agreeable. Some contracts have conditional offers and acceptances, where the contract only exists under set conditions. If the receiver is silent, passive, or doesn’t act in response to the offer, the contract has not been finalized. The receiver must make an obvious and clear message of intent to fulfill their side of the contract before it can be seen as valid.
Cannot Violate Law
A strong contract cannot violate the law. Contracts that jeopardize public welfare or contradict policies the public must follow could have issues of enforceability. There are times when events occur that make a contract impossible to perform. As a team member from Cohen & Cohen explains, if there was injury caused to one of the parties involved as a result of performing the duties within a contract, this could lead to issues and litigation later on. By having a contract law lawyer review a contract thoroughly, it can help prevent serious issues from developing. The priorities when creating a contract should be on realistic enforceability, not violating public law, clearly defining terms, and efforts to reduce the risk of personal injury.