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What does a business contract need to be enforceable?

When you are setting up your business, one of the most important aspects of protecting your business interests is to have solid contracts. These contracts can include everything from buy and sell contracts, purchase orders and work contracts to employee contracts and product warranties. They all are used to set up an agreement between one party and another.

Legally enforceable contracts

From a legal perspective, any specific elements for it to be enforceable.

  1. A contract must include an offer, the acceptance of that offer and the consent of both parties. Both parties must agree to the same terms on the offer and agree of their own free will. This creates a binding agreement.
  2. Both parties must exchange something of value through the contract. That exchange can include money, services and/or a product, but both sides must swap something of value for the exchange not to be considered a gift.
  3. Both parties must be of sound mind when they agree on the contract. Legally, that includes neither party being a minor at the time the contract is signed, both parties being sober when signing the contract and neither party being mentally deficient.
  4. The contract cannot be for something illegal, such as selling drugs.

Verbal contracts vs. written contracts

If you are a small business owner or independent contractor, you may wonder if entering verbal contracts are legal. They are in most cases, but they are more difficult to enforce in court.

Often, if you have a business contract dispute over a verbal contract, it becomes a case of he said/she said. If you end up in court, it’s more difficult to prove what the actual contract was and how it was or wasn’t fulfilled. That’s why it’s always better to have written agreements.

Attorney review

It’s also best if you consult a business law attorney before drafting your own business contracts or signing a business contract with another company. For your own contracts, an attorney can ensure your business interests are best protected with the contract language. With contracts drafted by another business, an attorney can review all the clauses of the contract, making sure you understand exactly what you are agreeing to.

By working with an attorney when you are drafting or signing contracts, your business is less likely to end up in a business dispute, which can be costly and time consuming. Being proactive about having strong contracts will help you focus more on making your business successful and grow.

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