All businesses, large or small, depend on contracts to ensure the proper delivery of goods and services. From small contracts with distributors to labor contracts and more, there is always something that needs to be detailed so both parties are in agreement at all times. Even if you’ve never written a contract before in your life, there are a few things to keep in mind, which can successfully get you through the process. As you get started in the world of contracts, be sure to remember these four things.
For a contract to be legally binding, there are two basic things it must include. First, it must have something of value that is being exchanged, such as a good or service. Second, all parties involved in the exchange must be in agreement on the contract. Really, those are the two main ingredients to complete a valid contract. Of course, it should be in writing, and you will want to check with your state’s laws to see other specifics, like how long it needs to be in agreement, if a third party must sign or if it needs to be notarized, for example.
Time limits on acceptance
There may be a situation in which you offer a contract to someone, and he or she needs to think about it for a while. In this case, it’s perfectly acceptable to put time limits on the terms of the contract, or to limit how long the current offer stands. Unless you state a specific expiration date in a contract, it will stay open for a “reasonable amount of time.” Of course, what is and is not reasonable would be open to interpretation and any specific facts of your situation. To limit any room for doubt, be sure to include a deadline by which the receiving party must make a final decision.
Negotiating over contract terms is one of the most common types of business negotiations, and it happens all the time. Whenever one party responds to another party with a counteroffer for the terms of a contract, the negotiation has begun. If you do reach an agreement on a counteroffer, it’s important to clearly state all terms of the new agreement and the fact that the previous offer is now void. The differences, as small as they may be, are important enough that you’ll want to make sure all the details are in writing and that both parties agree to all terms.
When it’s a gift
If there isn’t an agreed-upon exchange in a contract, then you may have a gift on your hand instead of something that is worth a written contract. For example, if a friend or colleague offers to help you unpack your next shipment without expecting anything in return, then it is a gift or a one-sided promise, which is not enforceable by law in most states. It’s important to keep this in mind, just in case your friend doesn’t come through with that promise to help. If that should happen, then you don’t have the ability to enforce that promise, since you offered nothing in return.
This article was written by Deborah Flomberg of Examiner.com for CBS Small Business Pulse.