Why Even A Simple Agreement Can Save Your Bacon
Every business owner states it; “Do I really require a composed contract?” The answer is “YES, YES and YES!” Utilizing a composed contract is like purchasing insurance for your business offers, however far better.
What Is A Business Contract?
Put simply, a business contract is an enforceable contract between 2 or more parties. The contract includes the guarantees made by the parties to one another, which is lawfully referred to as “consideration.” These guarantees define the relationship being carried out as well as what occurs if the business relationship doesn’t exercise. If one party stops working to act according to their guarantees, then they have actually “breached” the contract and can be discovered responsible for damages. The damages generally relate to what the non-breaching party would have received if there had actually been no breach.
Oral Contract v. Written Contract
You go to a party with a pal and meet someone interested in your services or product. Ultimately, you consent to provide him with 1,000 units of your product in exchange for a reduced price. You have actually produced what is referred to as an “oral contract.” He has actually promised to purchase items and you have actually promised to provide them at a reduced price. Is the contract worth anything? The answer is most likely no. Why? In many states, oral agreements are not enforceable if they bring an intrinsic value in excess of $500. Considering that it is so tough to establish the terms of an oral contract in a conflict the legal system attempts to prevent them. This legal constraint is generally understood as the “Statute of Frauds.”
Reversing to our example, what if you thought you were going to provide a 10 percent discount rate and he thought it was 20 percent? What if you can’t fix it and he insists you provide the reduced items? You will wind up in court with the conflict boiling down to which party the judge or jury believes. Are you really willing to take that gamble?
With even a simple written contract, you can create a stipulation containing language that states you will provide a 10 percent discount rate. If the conflict winds up in court, he is asked if his signature is on the bottom, the clause is read and you win. The contract must likewise contain a stipulation requiring the “prevailing party” to be compensated for their lawyers costs and expenses. In other words, he needs to pay your legal bills too.
An additional benefit to using a composed contract is the due diligence aspect. I realize you will be shocked to discover that there are unethical businesses. In negotiating an agreement, really particular requirements are put in composing. What if the other party starts squirming? It may be a sign they are unable to meet their obligations. Might that provide you pause before you commit to tying up your stock? You can conserve yourself a lot of headaches by discovering this details ahead of time.
In summary, even a simple written contract must be a mandatory bullet in your arsenal. Much like automobile insurance, you will be happy you have one if a business transaction breaks down.