Trusted Business Contract Lawyers
Learn the basics of business contracts and agreements, including why they are needed and what is required for them to be considered valid documents.
Author: J. Blake Ledbetter, Partner, Conoscienti & Ledbetter
Mr. Ledbetter specializes in civil litigation in metropolitan Atlanta, Georgia, and possesses vast experience in wrongful death lawsuits. Mr. Ledbetter was recognized as a SuperLawyers Rising Star in 2018 and 2019 in the area of Civil Litigation. Published on August 25, 2022.
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What Is a Business Contract Agreement?
A business contract, also known as a legal contract, is a legally binding agreement that binds two or more parties or entities engaging in business. This written contract is enforceable in a civil court to align with the contract law.
According to the law, a legally enforceable contract is a valid contract. This document is crucial as it sets out the terms and conditions, rights, duties, and obligations of both parties to avoid misunderstandings or disputes in the future.
Creating a business contract requires an understanding of the basics of contract law. You must also consult with a business contract lawyer to ensure that your agreement is legally binding and can be enforced in court.
Basics of Business Contracts and Agreements
Business contracts and agreements are vital for all types of businesses, whether small businesses, start-ups, or large companies. These types of contracts have been in existence since time immemorial.
Let us look at the fundamentals of business contracts. These basics ensure that legal agreements are valid in court.
Key Features of a Business Contract
Legal contracts have certain key features that must be met for the agreement to be binding and enforceable in court.
Here are some of the key features of a business contract:
The desire and expression of willingness to enter into a contract. It demonstrates that your business is ready to accept contracts.
Agreeing to the terms and conditions of the contract. This can be done verbally, in writing, or by action. The various types of acceptance are:
- Conditional acceptance
- Acceptance by action
- Option agreement
Parties should bind themselves to business agreements in line with the state’s legal obligations. In other words, it must not violate any existing laws.
The contract becomes binding when the two parties exchange something valuable. It is money most of the time, but it can also be a service. This is what is known as consideration.
Business law requires that all parties agree and consent to the terms and conditions of the contract. If one party does not agree, then the contract is void. This is what is known as mutuality of obligation.
Competency and Capacity
The parties to the contract must be of legal age and have the mental capacity to understand the terms and conditions of the agreement and should not be under the influence of intoxicating substances when signing the contract.
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Types of Business Contracts and Agreements
There are different types of legal contracts that you will use during your normal business operations. Familiarising yourself with the necessary business documents and agreements will help you run your business smoothly.
General Business Contract
General business contracts are legal agreements related to starting and running businesses. They cover the structure of your business and the protection of stakeholders. They include:
- Partnership agreement – This mutual agreement clearly outlines business relationships between partners, their obligations, and contributions to the business.
- Indemnity agreement – It is commonly known as a hold harmless or no-fault agreement. The agreement involves two parties, where one party agrees to indemnify another individual or other parties for losses or damages that may result from a contract.
- Nondisclosure agreement – It is a written legal agreement where the parties declare that they will not share confidential trade information with any other party outside the organization.
- Property and equipment lease – An agreement where the property owner or equipment allows a lessee to use the property or equipment for a set period. The lessor receives payment in return. Small business owners can benefit from this agreement as they will use equipment and pay later.
- Franchise agreement – An agreement where a franchisor licenses its intellectual property, business name, branding, and all the rights to sell goods and services and licenses to another business.
- Settlement agreement – This is a binding business contract that settles legal issues without filing a lawsuit in court.
Hiring new staff can create liability issues for your company. Employment agreements give you control.
- General employment contract – It is an agreement that outlines the relationship between an employee and employer, job descriptions, and any issues related to the work environment.
- Independent contractor agreement – This is also known as the freelance contract agreement. It outlines the scope of work, payment obligations, and independent contractors’ expectations. You are not responsible for tax obligations; therefore, you can’t put restrictions on freelancers working with other businesses. What matters is that the contractors finish the job you assign them on time.
- Non-compete agreement – It is a contract that forbids your previous employee from working with your competitors for a specific period. The contract should be clear on the timespan of a non-compete, the geographical location it extends to, and a list of competitors.
A sales agreement explains issues around the sale of goods, services, and property. The contract also outlines how to transfer a title. They include:
- Bill of sale – A legal document that shows two parties have agreed on the terms of sale of a commodity or service.
- Bill of lading – A legal document for two parties shipping freight that details the type of goods, quantity, and destination.
- Purchase order – A legally binding contract that commits a business owner to buy an item at the agreed purchase price. A purchase order also outlines payment terms and delivery dates.
- Statement of work – The statement of work outlines factors like scope of work, location, terms of payment, and task expectations.
- Warranty – A guarantee that the product seller will replace or repair their product in case of damage.
The different types of contracts listed above are the most common to encounter as you run your business. Each of them is detailed and includes legal information. Therefore, hiring a business contract lawyer with years of experience in contract law is recommended.
Working with an attorney or law firm will help you understand the legal repercussions that you may face with failure to honor such agreements.
How to Make Solid Business Contracts and Agreements
Creating a solid business agreement is an involving task. Use the following tips to make the process easy and fruitful:
Put the contract in writing – Written contracts are easy to prove and enforce in court than a handshake or oral agreement.
Use simple language – A good business contract is easy to read and comprehend. Using clear and straightforward language will bring out correct meanings for words.
Address all details – No matter how small and less critical an issue might seem at the moment, it is essential to make it clear to avoid misinterpretation in the future.
Specify the conditions for termination – Be clear on the circumstances that can lead to contract termination for both parties. This is helpful in the long run as it will prevent a lawsuit for a violation if you decide to terminate the contract.
Seek professional advice – Hire a trustworthy business attorney to provide legal advice on the agreement and ensure that you have everything right.
Where Can I Get a Free Business Contract Template?
If you don’t have the time or money to hire an attorney, the next best thing is to get a business contract template. The internet has many sites that offer free contract templates for businesses. However, you need to be careful as some of these sites might not have updated their documents according to the current laws.
Don’t delay. Schedule a risk-free consultation today.
Importance of Written Contract
PUT IT IN WRITING! is a phrase you need to remember whenever you want to get into a business contract.
It is usual for people to make business deals through word of mouth and seal it with a firm handshake. Handshakes work until everything goes wrong and crumbles. The first question your attorney will ask is, did you put it in writing?
A written agreement provides tangible evidence for the jury and court during litigation. Memories fade away, but words in writing will never change. A written business agreement will give you solace when it is your word against the other party.
Written business agreements help avoid litigation. All the terms and conditions of your agreement are documented. Therefore, if there is a dispute between parties, refer to the document to get the facts right. This will clear any doubts and misunderstandings and save considerable time and money you would have spent in court.
Hire a Business Contract Law Firm for Your Business Contracts
The terms and clauses in a contract are critical to your agreements. They can have direct financial consequences for you and your business.
It is essential for your contract to reflect your exact wishes, obligations, and expectations of the other party. Business contract lawyers can ensure that this is the case. They can help you draft, negotiate, and review your contracts to ensure that your interests are adequately protected.
Hire an Atlanta business contract legal professional to assist you with your contract needs. Contact Conoscienti & Ledbetter to schedule your free consultation.
315 W Ponce de Leon Ave. Suite 400 Decatur, GA 30030