A contract is an agreement between parties (individuals or companies) in which one or more of the parties promises to do something in return for something of value. If you run a business, or are thinking about opening a business, you will come across contracts fairly regularly to sell products, employ workers, purchase supplies, and purchase or rent the space in which your business operates. Whether you are the one creating the contract, or being asked to sign a contract, it is always wise to seek out the assistance of a knowledgeable attorney that assist you in making sure the contract is drafted correctly and covers all of the necessarily elements.
While most business owners will rely on the expertise of attorneys for help, it is still important to have a general working knowledge of what a contract is and what contracts generally include in them. There are three main elements that must exist for a contract to be binding. First there must be an offer, meaning that one party promises to do or not do something. Second, there is an acceptance, the other party accepts the terms of the offer without changing those terms. Lastly there must be consideration: the parties must exchange something of value (the most common example is money). In addition to these three elements, there must be mutual assent, often called a “meeting of the minds.” Meaning that all the parties understand and agree to the material terms of an agreement.
A properly drafted contract helps define what benefits, risks, and liabilities each party is responsible for. If something goes wrong between the parties the contract is where they will look to determine who is responsible for this contact and what their rights are. Without a contract you run the risk of one of the parties not holding their end of the deal which could prove catastrophic for your business.
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