The business contract - a gentleman's agreement?
What details should be covered in a Business Contract?
Business contracts are essential to all businesses to ensure that both parties know exactly what their rights and responsibilities within a business transaction or period of business are. Business contracts vary in length. Some business contracts can be days, weeks, months or years depending on the size of the job, whether it’s a rolling contract and what the service provided is. Businesses that offer a service that is required regularly will often have longer contracts than a contract between buyer and seller online through e-commerce. No matter what the size or length of business transaction it is vital to have a business contract in place that has been professionally drawn up, in writing, to detail what the parties involved can expect from each other and expect of themselves. Without such a contract in place or with a poorly worded contract drawn up, there could be ramifications for either or both parties and result in substantial financial loss should the case result in litigation.
The following is a list of different types of business field in which contracts would be required.
- Terms and conditions of sale, as a seller of any product
- Terms and conditions of purchase, as a buyer of any product
- Trading agreements, trade between businesses requires contracts
- Distribution agreements between distribution companies and their receivers
- Agency agreements
- Franchise agreements made between the name owner and the individual wishing to trade under it.
- Facilities management agreements
- Joint ventures
Whatever the area a business, a contract will be required. The contract will not be able to be based on a generic form. Each contract will need to be individually tailored to suit the individuals involved from both parties. The contract will usually involve details of offer, acceptance, consideration and all relevant legal relations. The creation of these contracts will usually require a legal specialist, especially the larger more extensive contract agreements. Although the contracts will need to be tailored to fit the individual’s needs, there is a general list of what areas will be covered. The following list details these:
- Parties: All details of the individuals business parties involved need to be included and clearly stated. All details must be correct.
- Definitions: This is required to detail the meaning of any terms defined in the contract that could be open to confusion.
- Payment provisions: Details here should provide outlines for the payment procedures and amount to be paid upon completion of the contract Set dates and time schemes for payment.
- Description of good or service: A specific description of what goods are to be delivered or what services will be provided, including all required jobs that will be carried out.
- Term of contract: details the length of the contract between businesses, provisions for a rolling contract should be made here.
- Limitation of liability: All relevant details on parties liability need to be included here in case of any accident resulting in damaged property, injury or loss of goods.
- Termination process: this will detail the process and steps that will be taken to terminate the contract should either party cause a reason for this to happen.
- Dispute resolution: This sets out what steps will be taken to resolve a dispute should one arise during the term of the contract.
Other provisions that are usually covered within business contracts are confidentiality, intellectual property rights, warranties, indemnity, assignation and applicable law. All of which need to be considered by both parties and fully agreed upon, before work can be carried out.
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