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The 6 Essential Elements of a Business Contract

business contracts lawyersWhile most business owners have signed a contract at some point in their lives, few understand what goes into creating a business contract. With the assistance of a business lawyer, you will be able to draft impressive, airtight agreements that last for years. But first, you must understand the basics.

Here are 6 of the most important elements included in a business contract. 

  1.  The Parties 

In order to have a legal business contract, you must include a declaration of the parties involved. A signature at the bottom will not suffice. Typically, this declaration is included within the first several paragraphs. It will list yourself and whatever entity or person you wish to enter into an agreement with. 

  1.  Legal Purpose 

All business contracts are deemed invalid if they involve illegal activity. It’s essential to note that, even if you remain unaware of illegal activity on the part of another entity, your contract may remain invalid.

For example, should you enter an agreement for products from an entity responsible for stealing those products, you won’t be able to enforce delivery in a court of law. To keep this situation from occurring, it’s important to conduct background checks and call references before entering into a business agreement. 

  1.  Delivery 

In your business contract, you’ll need to outline exactly how services and goods will be delivered and/or shared between the parties. This section of your contract should cover shipping, liability, insurance, and other important details. Remember, a court will not uphold a piece of your agreement that wasn’t explicitly stated in the contract. For this reason, you should be as detailed as possible. 

  1.  Compensation 

Also known as “consideration,” this part of your contract will detail the benefits each party stands to gain from your agreement. If there are deposits required before services or products can be delivered, those fees should be outlined here.

You’ll also want to include a planned payment schedule, as well as specific dates, times, amounts, or percentages that are relevant to the agreement. Again, the more detailed your contract, the more protection the courts can offer. 

  1.  Terms and Conditions 

Often the lengthiest portion of a business contract, this section details the rights and obligations of each party. The content of this section can vary widely depending on the context of your agreement. If you work closely with a business lawyer, you’ll have assistance in determining the exact language you should use here.

For example, you may use this section to:

  • Reserve the right to leave the contract at any time
  • Tie yourself and other entities to the contract until its completion
  • Outline exact payment dates and amounts
  • Describe under what circumstances the contract becomes null and void
  • Detail the circumstances under which a party may leave the contract
  • Define the legal process that may proceed if the contract is broken 
  1.  Consequences 

When a legally-binding business contract is broken, there are consequences for the offending party. This section of the contract should explain what happens if the products or services outlined in the contract are not delivered. It should also detail what happens should the buyer fail to pay, where the matter can be litigated, and how much time the offending party has to correct the problem until legal consequences occur.

Contact a Florida Business Contract Attorney

Regardless of whether you’re just starting out, or have had your business for years, having air tight business contracts in place is critical to the sustainability of your business.  Contact the Law Office of Todd M. Kurland at (561) 693-4514 for assistance in drafting business contracts that will go the distance.

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