Nearly everyday business professionals are entering into agreements or transactions with one another. The agreement may be for providing a product or material to a customer, or agreeing to perform a service for another professional or individual. Chances are, these business transactions are considered contracts.
For an agreement to be considered a contract, it does not need to be in writing. Contracts can be created verbally or in writing. A contract is defined as a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law recognizes a duty. Private businesses or individuals can negotiate and contract into nearly any agreement that they would like, as long as it is not illegal.
As you can imagine, contracts created by verbal words alone can be very difficult to enforce. Arguments become a dialogue of “he said,” and “she said.” They also leave a lot of room for ambiguity. Where there is ambiguity, there is often conflict. Having a contract drafted properly is a great risk management tool for businesses and individuals alike.
Contracts are a great risk management tool because if they are drafted and used properly, they will establish the expectations for all parties to the agreement, addresses how issues will be handled in advance, and set the legal obligations and rights of each involved party. Additionally, by having a properly written contract businesses are more likely to receive payment for the service or goods that they provided in a well-timed manner.
A properly drafted contract, at the very basic level, requires an offer and then acceptance of the offer. For a contract to be legally valid, “consideration” must be present, as well as definitiveness in the contract terms. The term “consideration” is a somewhat complex legal concept, but when simplified it just means something of value is being exchanged for the benefit or detriment of another.
Businesses should consider the importance of having a contract drafted when wanting to ensure the payment of a service and/or goods provided; when wanting to limit their obligations (such as, having to complete additional work without getting paid), and/or to specify the negative consequences of the other party involved not following the terms of the agreement.
At Gilchrist & Fields Law, we nearly always recommend that businesses and individuals seek legal representation when drafting a contract, and before signing a contract. If you need help drafting or reading a contract, do not hesitate to contact Gilchrist & Fields Law.