It is true that you don’t necessarily need a legal assistance in creating a business contract. It is best to keep your contract written in layman’s terms that can be understood by all. However, there are essential parts that should be present in your business contract to make it legally binding.
A business contract serves as the agreement between two or more companies or business partners. It presents the rules and clear guidelines for all of the involved parties.
You can use the following essential tips for creating a well-written contract:
Purpose of the Contract and Terms of Agreement
Creating a contract is based on agreements between the parties involved. This part should list down what is expected to be contributed or fulfilled by each party. Usually, this part has already been agreed upon during a meeting before the contract creation.
Detail the Exchange of Items or “Consideration”
A contract cannot exist without a “consideration” section. This part should clearly specify what value should be exchanged for something of value. This can be money in exchange of a product or service, a service in exchange of a service, a product for a product, or a product for a service or vice versa.
It is important to include terms on how parties can end the contract. This includes information or steps if either party needs to terminate the deal or break the business relationship, such as a 30-day notice and that termination should be in writing.
Dispute Resolution Terms
Just like any other contracts, a business contract should also include details of how parties should handle disputes if ever a breach occurs. For small businesses, it is best to consider adding an alternative dispute resolution (ADR) clause.
The business contract is considered as the binding rules on how a business relationship should work. You can always check for online templates, but it is wise to create your own based on your purpose and have a lawyer review your document.