Contract businesses have been in existence for centuries. Companies rely on individuals and other businesses for goods or services through contracts. You can put it in writing, or you can have a handshake deal, otherwise known as a verbal agreement. A written agreement is good in contract businesses because it gives deals legitimacy. A contract offers both parties several benefits.
First, the parties can make decisions based on contract terms and value. For example, a person who has a contract to deliver X amount of product Y can contract company Z to deliver W quantities for the raw materials of product Y.
Second, the parties can subcontract a part of the agreed products or services. For example, a person with a contract to deliver X quantities of fresh farm products can contract farmers to deliver the same.
The nature of contracts is such that, if the parties do not keep their end of the bargain, they can cause serious problems to the other party.
What Constitutes A Contract?
The most important part of a contract is the terms section. It stipulates the nature of the engagement. A typical contract business engagement should have a simple, but elaborate terms section. In this section, you agree on the duration of the contract; the objects of the deal; details of the work, service, or good; compensation; and any other item that you wish to include.
A contract must have at least two parties. A typical swimming pool contractors Las Vegas would be between the swimming pool construction company and the prospective owner.
Agreeing to work together or for each other is imperative for a contract. It is referred to as mutual consent. A deal is not complete if any of the parties is not happily signing it.
What to Avoid In a Contract
One party can attempt to exploit the other party through a contract. There are laws governing contracts to avoid exploitation of one party. The laws differ from one state to the other, but the overriding principles of a good agreement are universal. They include:
Undue influence or duress— all parties must be in a position to enter or decline the invitation to enter into a contract. If a party feels obligated to enter into one, then the contract is invalid.
Misrepresentation — the person or business must not fraudulently represent himself or herself. For example, a junior company employee may not enter into a contract on behalf of the firm unless he or she has authorization. The parties must also be legal—properly registered and permitted to make binding decisions. You cannot have a contract with a minor.
Impossibility — a contract must be realistic. It must have a clear set of goals and objectives. At the very least, the agreement should have measurable deliverables that can be delivered within doable timelines.
Unconscionability — the parties must find a balance between their strengths and expectation. A contract should not be a humiliation endeavor in which the parties have nothing in common safe from the exploitation of the lesser parties.
Making mistakes — some errors of judgment can make a contract null and void. For example, if the parties stand to be worse off after the completion of the contract, then the contract is best terminated.
How to Enforce Contracts
A contract should run smoothly, if there are challenges, the parties have two options, to amicably work out the issues or seek a court process.
In case of a breach of contract, litigation can help. The aggrieved parties can seek:
Alternative Dispute Resolution (ADR)
Contracts develop issues all the time. Common issues include delays, damages during freight, and environmental concerns. Parties can resolve unintentional breaches of a contract without engaging a third party. Official ADR can be instituted if the parties deem it necessary.
Contracts are inevitable for small businesses. Some of the services cannot be delivered in-house. You have to outsource some of the functions such as auditing. Whatever you are doing, having a legally binding contract is good. Ensure that you have clear terms.
Publish Date: July 15, 2020 9:54 PM