Contracts are voluntary legal agreements between two or more parties that outline each party’s rights and obligations. Oral and written contracts are both legally valid, but for business purposes, the old-fashioned concept of “doing business on a handshake” is falling out of favor. The complexity of modern business contracts, together with accounting procedures, employment regulations, disputes, and subsequent litigation, has made it advisable for businesses of all sizes to have their contracts in writing. If you have questions about a current contract you’re using or need something drawn up, give us a call today to set up your free consultation.
Contracts consist of an offer, an acceptance of the offer, and a consideration — which means remuneration with conditions — for the work performed. These legal agreements aim to ensure that the parties to them understand the details of the business agreements they are making. They become serious about their actions and goals, and work out the precise details of their venture, including their obligations, payments, warranties, services, earnings, and penalties for non-performance.
The contract negotiation process is a time when prospective business venture partners learn about each others’ personalities. The attention that a party spends on details gives an insight to his seriousness about the business venture. A party that speaks in general terms and does not study the details could trigger doubts about his seriousness, or even probity, among the other negotiators.
Employment laws that stipulate broad conditions on the hiring and firing of employees, and the benefits that employees qualify for aside from salaries, exist in most countries, but national regulations do not always provide either the employer or employee with a clear agreement. An employment contract between the businessand an employee sets out an employment offer, the responsibilities of the job, its salary and benefits, and a probation period during which the employee may be dismissed. A detailed contract protects both employee and employer from spurious claims by the other party.
Confidentiality and non-disclosure agreements are often part of business contracts between prospective partners and part of employment contracts. They bind the parties to hold market-sensitive, technical and commercial information strictly within transactions that affect the business. There is a fixed duration for these confidentiality agreements that is stipulated within the contract. This duration can vary widely over months or years, depending on the business. The disclosure of confidential information by one party can lead to a claim of breach of contract by the others.
Disputes and disagreements can arise in all business ventures. A business contract should have a special section devoted to the treatment of disputes, providing for their resolution where possible, perhaps through mediation or arbitration. If a contract stipulates detailed mediation and arbitration procedures, the parties may be able to avoid the expensive litigation costs that a serious disagreement may cause.