Business Law

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If you are a business owner, you know that business agreements come in many shapes and sizes; but there are underlying principals you should keep in mind for each agreement, no matter the type. Below are some considerations to help you ensure your business contracts are valid, enforceable and appropriate for the type of business you are conducting.

Initial Considerations

Contracts Should Be in Writing

As you may already know, it is best practice to have your agreements in writing. Oral agreements can be enforceable in court, but a detailed agreement in writing is more likely to be enforceable. Enforceability is essential in actions for breach of contract, so having a professionally drafted agreement can help limit your risk.

Negotiation

Negotiating business agreements can be complex and requires careful attention to detail. Negotiations occur in multiple stages. Often, parties will exchange initial offers letters or term sheets, prior to settling on the minutia of the agreement. Parties usually agree to high-level terms like price, services rendered, types of goods purchased and timeline. 

Once the parties agree to the high-level terms, they will draft a “long form” agreement which outlines every detail of the agreement. Negotiating contract terms in business may involve corporate formation, business divorce, mergers and acquisitions and buying equity in a company.

The Necessary Elements Of A Contract

Mutual Consent, Offer and Acceptance

To form a contract, both parties must enter into an agreement through their own free will. As such, one party may not force or coerce the other party into entering into a contract. Further, a contract must include a specific offer and a specific acceptance of that offer. Lastly, there is an additional implied condition which is that both parties intended to create a binding agreement.