A business contract is a written agreement that explains a transaction between one or more parties. Business contracts vary widely depending on the nature of the transaction and businesses involved. Unfortunately, business owners often underestimate the importance of the contracts they sign until something goes wrong. As a result, every business owner should be familiar with the basic elements of a business contract to understand what they are getting themselves into. Here are some basic elements of a business contract that every business owner should understand.
First, the title gives the reader an instant understanding of the contract’s purpose. In addition, it can provide a basic summary of the transaction so that the nature of the agreement can be referenced throughout the contract. Finally, if there are multiple documents that are attached to the contract, the title provides for an easy separation of those documents.
Identity of the Parties
This is one of the most important parts of any contract. The contract should clearly state who is a party to the agreement. If it is an individual, the contract should state the name and address of that person. If the parties are businesses, it is important to state the legal name and principal address of the business. When the contract clearly identifies the parties, there will be no confusion over the identity of the responsible parties if a legal issue occurs.
Definition of Terms (if necessary)
Depending on the complexity of the contract, a list of terms may need to be defined. This list contains simple definitions of more technical terms. These definitions provide understanding of how the term applies in the context of the contract and the particular section that contains the term.
The main subject matter of the contract defines the obligations of the parties. It may include each party’s responsibilities, representations that each party makes to each other, or actions that the parties consider as a violation (breach) of the contract. The contract may also provide remedies for each party in case a party fails to perform their responsibilities. In addition, each state has its own laws that govern contracts, so the contract may state which state’s laws controls the contract.
This provision anticipates conflict and states that if the parties go to court over the contract, the losing party will pay the winning party’s attorney’s fees. This type of provision benefits a party who becomes a victim of wrongdoing by another party. An attorney’s fees provision gives a wronged party the opportunity to recoup their legal fees. Sometimes it is not financially worth it to sue a party over a contract because the amount in dispute is less than or equal the cost to hire a business lawyer. An attorney’s fee provision prevents this scenario because it allows the winning party to recoup their legal fees even if those fees are more than the amount in dispute. As a result, the case becomes attractive for any lawyer to handle.
Finally, the signatures of the parties at the end of the business contract confirm their agreement to be bound. There should be space for a signature and the printed name of the party under the signature. If the party is a business, the person signing on behalf of the business should be an authorized representative. Also, that representative’s printed name and title should appear below the name of the company on the signature page. This clarifies the person is committing the business to the contract and not themselves personally.
A business contract is an important legal document that should be drafted by an experienced business lawyer. If you need an experienced Fort Lauderdale business lawyer to draft, negotiate or review a business contract, we are here to help. All you need to do is call us at 954-282-9331 or email us to request a free consultation.
Bryant Taylor Law
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Fort Lauderdale, FL 33301