If you hope to grow your business and develop relationships with the most important people in your industry, you need to be able to make successful deals in a number of various capacities. The first step to moving forward with a potentially advantageous deal is crafting an effective contract. But if you do not know how to write a contract, you could find yourself presented with a whole host of problems moving forward.
There are a lot of necessary elements and steps that go into building a contract, but if you approach the process with a thorough and cautious mindset, you will find that the idea of a contract does not have to be as intimidating as it appears.
In this piece, we will focus on the important elements of a contract and provide some advice on how to actually write a contract.
What Is A Business Contract?
A business contract lays out the terms and expectations of a business relationship. It should include the names of the parties involved as well as the activation and termination dates of the contract. The payment amounts and payment schedule and the steps to take when a contract is broken by either party should also be present in a contract, which should finally be capped off with the respective parties’ signatures.
A contract also needs to include an offer and an exchange. The offer is what is made by one party and accepted by the other, while the exchange is any money, goods, or services traded between the two parties. For example, if a business is looking to hire a contractor, then the business is offering employment while the contractor is accepting that employment. The business gives the contractor money in exchange for that contractor’s services.
Whether you are entering into a joint venture or franchising a business, a business contract is important because it establishes parameters and clarifies legal liability.
Naming The Parties Involved In A Contract
At the beginning of the contract, you need to name the participating parties. Now, simply naming the participants does not seem like it would be that hard of a task. But running into issues with this part of a contract might be easier than you would think.
Unless either of the parties involved in the contract are running a business as a sole proprietorship (a type of enterprise that is owned and run by one natural person),
then the names of the actual entities and not the specific people representing those entities need to be included within the contract itself. For example, if your name is John Smith, and you happen to be representing XYZ Corporation, then XYZ Corporation needs to be the name that is present in the parties portion of the contract. Otherwise, if anything should go wrong with a facet of the contract, you could be held personally liable.
Defining The Scope Of The Offer
When defining the scope of the contract’s offer, you need to be absolutely as specific as possible. This means that if you are engaging in a joint venture with a business, you need to lay out every single aspect of that venture. What is the purpose of the venture? What are you providing on your end? What are you receiving in return? What are the staffing and management specifications of the joint venture?
How do the two parties plan to share liability? If there is any sort of dispute, how will this be managed?
The part dictating these sort of specifics of the offer represents the body of the contract, and it is absolutely crucial that it is extremely thorough.
Specifying The Method Of Payment And The Payment Schedule
In the payment portion of the contract, you need to either enter in the hourly rate and what the expected time of completion is or what the total payment is.
This part of the contract can also include any upfront fees, late fees, fee installment plans, or the fees that are due if client cancels at any time.
Approaching The Contract Process As Prudently As Possible
Depending on how you approach the writing and implementation of a business contract, it may either seem like the most daunting thing in the world or an absolute walk in the park. In actuality, it is probably somewhere down the middle, but your need to exercise as much prudence as possible when dealing with business contracts.
Ask as many questions as possible.
Communicate with the other party who is signing the contract alongside of you as much as possible. Consult with lawyers and all other relevant experts.
Any and all precautionary measures are necessary to make sure that you are exercising the best business strategy as well as saving yourself from any pressing legal ramifications.