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What are Business Contracts?

Article Details
  • Written By: C. Daw
  • Edited By: O. Wallace
  • Last Modified Date: 22 November 2017
  • Copyright Protected:
    2003-2017
    Conjecture Corporation
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Business contracts are simply legal documents between two separate parties when some type of transaction or action is concerned. They help safeguard both sides of the contract by ensuring that the offered action is what is expected by the party being offered it. There are many different circumstances when these legal contracts should be used, and when they are, there are specific sections that need to be included. Legal counsel should always be consulted because different areas of the world have different legal requirements. Since each specific industry has different products or services, local regulations should be followed even though one contract may be different from another within the same type of industry.

Many circumstances will require that business contracts be drawn up. When hiring a person or company as an independent contractor, a legal contract should be drawn up. Partnerships within a business also require one to be signed, as well as when a company offers items on credit to another company. Another specific condition in which business contracts should be made are when franchising, leasing, or selling a business. In all these instances, the person offering the contract and the person receiving it are both safeguarded from any discrepancies that may occur. Since the transaction is completely outlined and both parties have signed it, it makes it a legally binding contract that must be followed by both parties.

Even though industry specific business contracts will require different types of information and agreements, all of them should be very specific about the given transaction. A standard form can be used but it should be revised to include details for each individual circumstance. It should also include a start date and an end date, as well as the exact amount of money that will be involved, as well as any late charges or financing fees if they apply. Every business contract should also include the conditions of default, what is accepted and what is not, as well as any penalties or consequences that may happen in case it does happen.

As mentioned above, there are two types of legally binding business contracts that are made. One is the basic written contract that requires both parties to sign in agreement, with everything specifically outlined and explained. The second type of contract is the verbal business contract, which usually occurs when the two parties are familiar with each other and trust each other to honor the agreement. Both of these types of contracts are legal and can be upheld in a court of law, with the written type being easier to prove and win if a case has to be filed.

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