A large part of running a business is creating and signing contracts, whether that be with buyers, sellers, investors, partners, among others. Most business owners enter contracts more often than they realize; any time you or your company agrees to make a payment or take a certain action in exchange for anything with value, a legal contract has been created- regardless of if it seems formal or not. For this reason, it is crucial for businesses to understand the basics of contract law and when a business contract lawyer might come in handy.
What is a contract and why should you use one?
By definition, a contract is “a legally enforceable agreement between two or more parties that creates an obligation to do or not do particular things.” “Party” can be used to refer to an individual, a company, or some other legal entity. Most contracts are made up of two essential elements: parties who are deemed competent and parties who are in mutual agreement. For example, a mentally disabled person would not have the ability to enter a contract. When one party disagrees to the terms, the contract cannot move forward.
It is best to use written contracts instead of verbal contracts because a written contract is much more enforceable. A written contract provides proof that a mutual agreement between competent parties was reached and helps to prevent a breach in the contract. If the terms are written out, no one has the ability to alter the contract once it’s finalized. While it is not always necessary to put your agreements into writing, there are some that by law must be in written form. Agreements that tend to require a written form include transfers of real estate, sales of goods with a value over $500, and contracts that will take more than a year to come to fruition.
What is a business contract lawyer and why do you need one?
Although you definitely can write your own business contracts, in some situations a business contract lawyer may be a better choice. When writing your own business contract, there are a lot of moving pieces to keep in mind that can become quite complex. The more pressing the matter is, the better it is to seek the help of an experienced business contract lawyer. While you may not want to spend the money to hire a lawyer, think about the money you may spend when battling a lawsuit due to a faulty contract. Getting a business contract lawyer to oversee your contracts helps prevent potential legal issues that may arise in the future.
A business contract lawyer is well-versed in the laws of contracts and can help companies and entrepreneurs handle their contracts that realistically are the backbone of their businesses. Business contract lawyers help ensure their clients stay protected and do not enter into any agreements that may leave their business at risk. More specifically, business contract lawyers can assist you with contract drafting, contract negotiations, and reviewing contracts.
What types of contracts do businesses deal with?
There are many different types of contracts that businesses may have to deal with, so it can be beneficial to have a business contract lawyer that possesses a lot of contractual knowledge. Having a business contract lawyer on your team can make the process of creating and reviewing contracts much easier and can offer peace of mind when it comes to the legal aspects of these agreements. Below, you will find a list of some of the popular business contracts.
Service Contracts
A service contract is an agreement between your business and the clients you serve. A service contract outlines all the terms and conditions of the services your business provides. For example, a contractor may use a service agreement to itemize all the renovations they will do to a customer’s home and how much each renovation costs. A service contract is needed anytime you plan on providing a service to a client, as it will help protect your own interests and insure you are receiving the proper compensation. On a similar note, if you are hiring services for your business, you should have your service provider sign a service contract that will outline the scope of their work, the proposed timeline for completion of services, and the payment method you will use to compensate them.
Investment Contracts
An investment contract is a legal agreement between two parties in which one party invests money with the resolution to receive a return. Investment contracts are governed by The Securities Act of 1933. For an investment contract to be thought of as valid, it needs to contain these 4 elements that are defined by the Howey test: an investment of money, a common enterprise, profit expectations, and derivation from the efforts of others. These contracts are essential to your business’s success, so it is important to request the assistance of a business contract lawyer that can help you create, audit, and alter existing terms of a contract in order to ensure the best outcome for you.
Partnership Agreements
Networking and creating relationships with other companies and entrepreneurs are integral parts of having a successful business. Business partnership agreements are great, until they’re not anymore. If partnership agreements aren’t fully laid out ahead of time, things can get messy. Having a business contract lawyer to assist you with your partnership agreements can help you avoid miscommunication with partners and allow your business to run more smoothly overall.
Employment Contracts
An employment contract is simply an agreement between employee and employer regarding the former’s terms of employment. While employment contracts can be verbal, implied, or written, it is usually best to have these contracts written up. The employment contract details the responsibilities and expectations that the employee agreed to when accepting the job offer. The most common type of employment contract is an at-will employment contract. In the United States, most employees work at will, meaning they can quit or be terminated for any reason as long as it is legal and is not because of discrimination or retaliation.
