What Should a Business Contract Include?

If you own a business, you work with business contracts on a daily basis. Agreements with customers and other businesses affect almost everything you do. Having a solid understanding of what a business contract should include can help you make certain that all your agreements are legally enforceable, complete, and protect you to the maximum extent possible. It’s important to keep in mind that a business law attorney can provide valuable assistance when any issues relating to your business contracts arise.

Business Contract Basics

A business contract is a legally binding agreement between at least two parties that relates to some aspect of business operations. As long as all legal requirements are met, a business contract is enforceable in a civil court.

A business contract establishes the terms of agreement between the parties named in the contract, including the goods or services being provided. The payment amount and due dates are also part of the contract. Business agreements may also define a legal relationship between the parties, such as partnership agreements and employment contracts. A complete business contract also often includes provisions relating to damages for breach of contract, remedies for insufficient performance, and other relevant matters.

In our previous blog post, Understanding the Importance of Contracts in Your Small Business, we discussed the elements that make a contract enforceable. Simply stated, the five characteristics of a legally binding contract are:

  • Offer and acceptance
  • Mutual assent or intention
  • Consideration (the value exchanged)
  • Legal capacity
  • Legality of purpose

In addition, some types of contracts must be in writing to be valid under Arizona law. Whether or not the law requires a written contract, a cardinal rule for any business is that every business contract should be in writing. That is the only way to ensure with certainty that the parties agree on the contract terms. It is also the best way to protect your rights and limit your liability.

In writing does not necessarily mean on paper, however. Today, a written contract can exist through use of a digital process, with an agreement and terms finalized via internet exchanges between the parties. The digital world has significantly changed the contracting process. The shift from using hard copy contracts to a digital process for written contracts requires awareness of additional requirements for making a legally valid and enforceable contract, such as applicable eSignature laws.

Components of a Complete Business Contract

When you enter into a business contract, it’s important to make sure that the agreement covers all the crucial and necessary terms. Even a small error or omission can make a significant difference in your legal rights and obligations (and liability) under the contract. An incomplete contract can pose substantial risks in the future.

The obvious first step is to clearly identify the parties to the agreement. If services are involved, the terms should make very clear who will provide the services, especially if one of the principals uses employees or subcontractors to perform work. If the contract is for goods, the items need to be described in enough detail to avoid any ambiguity.

The contract should clearly provide exactly what you receive under the agreement, and what your obligations are under the agreement. Payment terms and amounts must be spelled out in detail. If deadlines for performance or acceptance apply, a timeframe or expiration date must be part of the contract.

Additional provisions in a business contract address what happens if all does not go to the initial understanding or intentions of one or both parties. These terms often include clauses relating to:

  • Cancellation
  • Warranties
  • Arbitration or other alternative dispute resolution
  • Severability
  • Indemnification
  • Confidentiality

Finally, for all contract provisions, compliance with applicable laws and regulations is critical. In some cases, this requirement necessitates specific provisions referencing the relevant legal rules.

How a Business Law Attorney Helps

When you negotiate and enter into a business contract, the terms and strength of that contract significantly affect your operations, no matter what aspect of your business the agreement involves. Ensuring that your contracts are on solid footing is one of your most important ongoing business responsibilities. A business law attorney can provide substantial assistance and peace of mind for all your contracting concerns.

Before you sign any business contract, your lawyer should review the terms and documents and confirm that you fully understand your rights and obligations under the agreement. In some cases, it may be even advisable to involve your lawyer during the negotiation process, especially if the agreement involves substantial commitments or you encounter difficulty dealing with the other party.

Your lawyer should also review or help you create all the forms and templates that you routinely use in the course of business. Making certain in advance that the terms are compliant with the law and protect your interests to the greatest extent possible goes a long way to keeping your business running smoothly.

If you do encounter problems with performance of an existing contract, it is advisable to talk the situation over with your lawyer in the early stages of a potential dispute. In many cases, your attorney can help diffuse a problem before it boils over by offering solutions or otherwise helping you negotiate resolution of the issues.

Schedule a Free Consultation With an East Valley Business Law Attorney

In our business law practice at Peterson Law Offices, we understand that small businesses, whether new or established, often do not need a full-time lawyer but do need reliable, responsive legal counsel throughout the life cycle of the business. Our goal is to help your business succeed, grow, and thrive, while minimizing legal problems you encounter and finding the best solutions for the issues that do arise.

Our services include making certain that you protect your contract rights for all agreements relating to your business. We provide contract review for new agreements, as well as for standard forms and contracts you use in your business operations. We always provide high-quality legal services at affordable prices — and your first consultation is free of charge.

We welcome inquiries from clients throughout the East Valley, including Queen Creek, San Tan Valley, Gilbert, Mesa, and Chandler. Schedule your free initial consultation by calling 480-878-5998 or using our online contact form.

Categories: Business Planning