A contract is an essential element of any business. It allows the business to make legally enforceable agreements so it can plan out specific actions with confidence that the other party is going to meet its end of the agreement.
However, a good business contract must have certain key elements that are crucial for ensuring that both parties understand the contract and that it is legally enforceable should a dispute arise. Of course, a well-written business contract should minimize the occurrence of disputes.
Here are the key elements that make for a good business contract:
Contracts must contain an offer
First, there has to be an offer in place for a contract to begin. This should outline the details of the agreement as well as its terms and conditions. In other words, the offer is one business’ attempt to get into a contract with the other. An individual or company can make an offer through a public invitation by letting other companies know that they are interested in a partnership with them.
There must be an acceptance of the offer
Upon extending an offer, it is in the hands of the “offeree” to either accept or decline the proposal. They can do so partially or in its entirety. An offer can be accepted verbally or in writing. While making the acceptance, there has to be a clear statement indicating that the offeree has accepted the terms of the agreement.
Capacity matters when entering into a contract
The law requires that parties to a contract have the mental and physical capacity to make a sound judgment. Both parties must be of legal age at the time of entering into a contract. They must also not be under any coercion or undue influence when agreeing to it. For instance, a business cannot threaten another to enter into a contract, or they might face certain consequences for doing so. Not only is this illegal, but it would not constitute a valid contract.
A business contract is made up of several crucial elements. These elements are included to ensure that the contents of the contract are valid and legally enforceable. Additionally, they help prevent any misunderstanding that would have otherwise occurred if they were overlooked.