You own a startup business or probably enjoying growth and success as a service provider firm. You have a great customer base from years of hard work and a reputation you’ve also worked hard to build and earn. Then you continue to do business with other companies and one of them threatens to sue for services promised and they claim not to have been given. You can also check out contract templates in Word.
In such situations, a contract is valuable to serve as a record of the agreement you have entered with the other party. A contract by legal definition is an agreement between two or more parties to exchange things of value such as products and services for a price. Under state and federal law, only a few categories of contracts should be put in writing such as mortgages or sample contracts which runs for more than a year. However, if you want to protect your interests and your business, you need a written contract with the following elements:
1. Name of the parties: This should be a given but people write the name of the person representing the organization instead of the name of the legal name of the business itself. If you manage or own business as a sole proprietorship, it’s appropriate to establish and identify that John Smith is doing business as John’s landscape services. If you run a business as LLC or Limited Liability Company, defining your part in the contract by your name could eliminate any personal liability protection that an LLC gives you. Similar issues can arise with a partnership if each individual is identified as a party to the contract.
2. Offer: One of the first elements of a contract is an offer. There simply is no contract without an offer in place. A business can request an offer or an “invitation to treat” by announcing that it is open for bids and to accepting contracts. For example, If you are promoting your products in a store window, you’re offering acceptance by accepting customers. Listing your services or products as an advertisement in the Sunday paper also counts as an offering of the products and services to the general public.
3. Acceptance: This is what follows an offer, and it means some company or individual chose to take up your offer. What constitutes an offer as well as what’s included in acceptance can vary but generally should contain a statement of willingness from both parties in reaching or entering into an agreement which can occur as implied or given directly to a person or a group of people.
4. Terms: For your contract to hold weight and be legally binding, an offer must be made clearly and accepted. Before finalizing the contract, both parties should have the same understanding about the stipulations in the document because if it doesn’t suit any of the two parties, then it needs to be altered or adjusted.
Business contracts define the terms of agreements, services or products to be exchanged and any timeline set with the business partnership. Contracts must be written to prevent confusion and legal disputes in worst cases, providing legal resolutions if one party cannot fulfill his end of the deal. Use these steps in writing a business contract for your business and for the company you’re doing business with:
1. Determine if all parties are legally allowed to participate: The contract will be rendered void unless everyone involved has the complete ability and the right age to understand what they are signing. To make sure this understanding is facilitated, each party should be required to:
2. Define the scope of work: The terms make up the body of the contract. Begin by clearly detailing what the scope of the service or project is and what the limitations of your services are as well as the timeline you have proposed for the project to be completed. Be as specific as you can. Don’t simply indicate that you’re doing a roof replacement. Provide information on the roof designs and the type of materials you plan to use. Explain measurements and dimensions if you’re expanding it, parts of the wall to be removed if that’s included in the service, and any helpful illustrations.
3. Add a clause for disputes: Where contracts are concerned, disagreements always tend to occur no matter how well-prepared you are when two or more people work together. This clause will help make sure that issues can be resolved without seeking outside help or dragging each other to court. When the two sides can’t agree, though, what will happen? To avoid lawsuits, you could stipulate that disputes will be decided by a mediator instead of a court of law. This could save the company many thousands of dollars by only having to pay a mediator instead of lawyers, court costs and possibly hefty settlements.
Here are further tips you can use to finalize your contract:
Contracts often vary depending on service costs. Here are the most common types of contracts that contractors use:
1. Lump Sum or Fixed Price Contract: Lump sum contracts are good for situations when a clear scope and a schedule that’s also clearly defined is negotiated and accepted. For instance, if it’s necessary to turn the liability to the builder and to manage changes in orders for projects that is undetermined, this is the contract that works best.
2. Cost Plus Contracts: Cost plus contracts cover:
These amounts represent a percentage of the material cost of labor which also covers the costs of the ongoing operations and the contractors’ profit in the process.
3. Unit Pricing Contract: Often known as hourly rate contracts, this type of contract combines reimbursable expenses ass well as the fixed price type of contracts but they can be adjusted during the process in which the owner offers certain quantities and prices for the predetermined number of items.
As long as the contract outlines the specific details and both parties have signed and agree to the terms, a handwritten contract is legally binding and will always be enforceable in court.
There is a requirement that some documents be notarized, such as a real property deed. Unless specifically required by state or municipal law, a contract does not have to be acknowledged before a notary public.
Doing business can be tricky because it involves a lot of trust from both parties especially if large sums of money are at stake. At this point, oral promises lose their effectiveness and a written agreement that can be used in court is needed just in case the agreement fails.