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How To Avoid Legal Problems With Business Contracts

How To Avoid Legal Problems With Business Contracts

As a businessperson, you deal with contracts every day. They are the lifeblood of business. Without contracts, business would come to a halt. In fact, contract enforcement is one of the most important functions of the legal system. When contracts go bad, business suffers and expenses can quickly mount up. Avoiding legal problems with business contracts is imperative for business success.

Elements of a Contract

To really understand how to avoid problems with business contracts, it’s important to understand contracts and what they are. In order to be a legal contract, four major elements have to be fulfilled. If any of them are missing then you don’t have a valid contract. These are the elements in a nutshell, but if you want to know more, you should read about contract elements in-depth.

  • Offer: One party or more parties agree to do something or not do a specific action in the future.
  • Consideration: Consideration is the money or other value that will be paid when the action in the offer is completed. You should clearly communicate this with the offer. Consideration is what changes a simple offer from a gift into a contract.
  • Acceptance: the offer is accepted. It’s important that is accepted in very clear terms and that terms of the offer and consideration are accepted as well. You can do this in writing or you can do it by actually performing what was offered.
  • Mutuality: Mutuality is the meeting of the minds in the contract. This means that both you and the other party understand that it is a contract and that the contract needs to be performed.

When Problems Arise

While the elements of a contract are easy to understand, sometimes the contracts themselves don’t spell out the elements very clearly. You might have a contract, but the other party may not understand the terms. Your contract may not necessarily be clear on what is offered or the consideration might not be completely understood. When this happens, problems come up. In fact, many contract problems are due to problems in one of the elements.

You should keep in mind that contracts aren’t just limited to an agreement you make in writing. You could inadvertently create an oral contract by putting together the elements of a contract in a normal business discussion with a potential client or vendor.

Ways to Avoid Problems

In order to really avoid contract problems in your business, you need to follow a few basic guidelines. These three tips can help you avoid most contract problems. They won’t solve all of them, but they will help you deal with the most common problems.

  1. Get Everything in Writing: Take the time to make sure that any agreement you make is in writing. Make sure that every stipulation is clear and easy to understand. It’s even a good idea to go over the contract expectations with the other party prior to signing the contract.
  2. Get Legal Advice: You shouldn’t make any contract without having a lawyer take a look at the contract. If you are in business, you should have a relationship with a lawyer. You should make sure that an attorney from a law firm like Johnson/Turner Legal is there to review contracts before you sign them. Lawyers are trained to look over contracts and ensure that the contract meets legal requirements. They are there to help their clients fully understand what they are agreeing to.
  3. Ensure Contract Compliance: It’s important that you comply with any contract that you sign and are fully aware of the ramifications of not following those contracts. Likewise, it’s important that you make sure the other party complies with their responsibilities as well. Not enforcing a breach could result in the contract being modified because of your acceptance of new terms.

Avoiding legal problems will help your business grow and ensure that you have a good relationship with vendors, clients, and supplies. You’ll be able to avoid legal problems with business contracts if you can follow these three tips. You can focus on what you do best with your business instead of worrying about legal problems.

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