What To Consider When Drawing Up A Legal Contract In Business

By Danielle Grate

Disclaimer: If you’re drawing up a legal contract in business, the following information should only be treated as a general guideline. It shouldn’t, however, be taken as actual legal advice as to the legal nature of making a contract in business. To better learn the legal process regarding the subject matter, do contact an experienced lawyer now for more information.

When you’re entering into a contractual business relationship, it’s best if you have a legal contract that binds you and the other party. A contact creates a legal obligation between parties involved therein. However, for a contract to be valid, binding and enforceable in court, it must include all essential information about the parties to ensure fairness. If you plan on drawing up a legal contract in business, below are the things you have to consider:

  1. Know The Necessity Of Having A Contract: Before anything else, you have to determine whether you need a contract or not.
  • Remember that if you’re exchanging something of value to another person or entity, a legal contract should be in place. Common cases where contracts are required include business transactions where there may be an exchange of product or service.
  • Keep in mind the form you want for your contract. In business settings, contracts are not legally valid unless in writing. That’s why you have to be sure that your contract is written, not just verbalized, for the successful fulfillment and delivery of the obligations.
  • In knowing the necessity of creating a contract, you also have to consider the basic contract fundamentals such as the offer, acceptance, and consideration. These requirements should be stated in the contract to avoid the likelihood of a breach of contract by any of the parties.
  1. Meet Requirements For Both Parties Involved: In making a legal contract, consent and qualifications of the parties involved are essential.
  • When drawing up a legal contract, one of the important things you have to ensure is the qualifications of the parties involved. As provided by law, anyone can enter into a contract except for minors, and those with an unsound mind.
  • Make sure that the contract identifies who the parties are. Also, don’t forget to check whether both parties are legally eligible to participate in the contract and that consent given is not through fraud or coercion. In other words, ensure that both parties have expressly and voluntarily agreed to the contract.
  1. Use Language That Both Parties Understand: Take note that a contract presupposes the meeting of the minds. That’s why it should be crafted in a language both understood by the parties.
  • Don’t commit the mistake of drawing up a legal contract in a language not familiar by both parties. In the simplest terms, you have to make sure that the contract is written in such a way that both parties know exactly what they’re signing and what the provisions mean.
  • Also, ensure that each party’s rights and obligations should be laid down in detail. These things should also be conveyed using specific language that doesn’t leave any room for misinterpretation.
  • The contract specifics such as each party’s obligations and remedies when there’s a violation should also be included in the contract. That way, you’ll know your next steps when a contract dispute arises.
  1. Be Detailed With Your Payment Terms: The most common reason for contact disputes is the violation of the payment terms and conditions.
  • If you’re drafting a legal contract, it’s a good move if you specify how payments should be made. As much as possible, be specific with your deadlines (if applicable), payment dates, methods and even terms.
  1. Include A Termination Clause: In legal contracts, a termination clause is also of primary importance.
  • It has been noted that contracts are also terminated after the expiration or when there’s a breach of some of the contract provisions. An example of this is when you fail to perform certain contract duties or when you miss out payments.
  • When you have a termination clause, it’ll be easier for you to terminate your contract especially when one of the parties is no longer performing. That way, both parties will be given the right to terminate the contract when necessary.
  1. Take Note Of The State Laws That Govern Your Contract: When you’re creating a legal contract, you also have to consider what state laws will govern it.
  • Since state laws vary from one place to the other, it’s vital if you know what state laws will apply to both parties in the contract in the event of a dispute. This may become more complicated and more costly when one of the parties is residing in a different location. For that reason alone, it’s a good idea if you include which state laws should be applied to the contract.
  1. Include A Confidentiality Clause: When entering into a business contract, there are instances where the other party will gain access to your business practices including your trade secrets. Because of that, a confidentiality clause must be incorporated in the contract.
  • If you don’t want to disclose your business information and the information stipulated in the contract, you must include a clause which makes all information strictly confidential.

When you’re writing a legal contract, keep in mind that you have to draft it in a way that your business interests are protected. That’s why it’s imperative if you get to know the legal terms and processes you need to consider when drawing up a legal contract in business. To further understand the legal aspect of making a contract, feel free to talk to a licensed attorney.

 About Danielle Grate
Daniel Grate is a professional writer in the law industry. She currently writes pieces on various law topics for the common reader. In her spare time she spends quality time with her family and friends.

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