The foundation of any good business relationship is a strong contract. A contract lays the groundwork for everything else in your future: it establishes what you are doing for them and what they are giving you in return. If you are in the process of writing a contract or signing one, you need to know what should be there and what isn’t. An ineffective contract just spells doom down the road for everyone involved.
You don’t want to get started on the wrong foot. Here are our 6 elements that should be included in every strong contract:
Offer. What is one company offering to do for the other? The offer should clearly state the extent of the work. It should include everything you plan on doing, no matter how self-explanatory you think it is.
Consideration. In exchange for doing work, the other side must provide something. This is the consideration. This is typically payment, but it can be an exchange of services for some other type of good. Just like the Offer, this should be written as clearly as possible.
Capacity. This illustrates that both parties are in sound mind when writing and signing the contract. As in, they had the legal capacity to sign it and know what they were agreeing to. This gets complicated and usually breaks the contract if someone signing is a minor, mentally disabled, or incapicitated at the time of signing.
Mutuality. This states that both parties must be held accountable for their end of the contract. If only one side can be held accountable, then the whole contract is void. This preserves the integrity that both sides of a contract have something to lose and something to gain.
Legality. This one is fairly self-explanatory: if a contract involves any illegal behavior, the whole thing is void. If you were illegally smuggling something into another country, you could not draft a contract and hold the other side accountable to it. It doesn’t matter if you weren’t aware something was breaking the law when you wrote the contract – the contract is still null.
Acceptance. This means that the side you are representing fully understands everything in the contract and agrees to it! You could sign a contract before fully reading it, but your Acceptance would hold you responsible for everything contained within. Don’t sign something you don’t fully understand!
Ask For Help! You don’t want to draft or agree to a contract that doesn’t have your best interests at heart. Never agree to anything without consulting an experienced business law firm first. Contact Cueto Law Group PL today for any help you need with contracts. From boardroom to courtroom, we’ve got you covered!