By BHL Solutions
Why you should have a contract? It would benefit you, if you become familiar with a particular contracting procedures and options available to you. Without contracts, when one member of the party in a deal defaults, no binding law can hold him responsible for damages. In business, no matter how we wish to view partners in business positively, there are often scams. For instance, if you make a purchase from an e-commerce company whose operations are online, with no contract to hold them accountable when the product is defective or not what you want, you are losing. A business becomes less risky, when you take contracts serious during collaborations. It saves you resources, and also, time that would be spent in a legal battle.
What are contracts?
Contracts are legal documents between two or more parties. But before a contract becomes enforceable, the contract should have certain elements. Regardless of where the contract was formed, the law requires that these seven elements exist. If one or more of these elements don’t exist in the contract, the contract would be void and the parties would be excused from any obligations.
The Elements of a Contract:
Offer: Offer begins a contract. One party has to propose to the other party, including terms, before a contract to start. When the offer is communicated to the other party, he/she has the right to accept, reject, or amend the offer.
Acceptance: can be done in writing, in person, or over the phone. The acceptance must simply be communicated to the offering party, with an obvious declaration that the accepting party intends to be bound by the terms.
Consideration: is something of value that the parties are contracting to exchange. They can exchange money for property or services, as long as it is of value for the other party.
Competence / Capacity: is the legal capacity and ability of a party to enter into a contract. A party has to be 18 years and above for a contract to be binding. When a minor signs a contract, the contract is not binding. Another reason for incapacity is mental illness. A person incapacitated by a disease or disability, who does not understand the terms of a contract he entered, has the right to rescind his acceptance of an offer, voiding the contract.
Mutual Consent: if consent is not mutual, then a contract is not binding. Consent obtained on duress, or because of the exercise of undue influence, that consent is involuntary and the contract is void.
Legality: A contract is only enforceable if the activity in the contract is legal.
Writing: A written contract is required for all transactions involving real estate (i.e., lease or sale of a home), any promises to marry, any agreements to pay a third party’s debt and any transaction in which performance cannot be completed within one year of the contract signing. Although it is not all contracts that needs to be written, but under the law, certain contracts need to be written to be enforceable.
Advantages of a Contract
- Provides proof of what was agreed between you and the other party.
- Helps to prevent future misunderstandings or disputes by making the agreement clear from the beginning
- Gives you security and peace of mind by having the terms of the agreement down on paper which the terms do not change
- Reduce the risk of a dispute regarding payments, responsibilities, and timeframes that the service to be performed under the contract
- Sets how disputes will be resolved
- Specifies how either party can end the contract before the work is completed.
In conclusion, having a contract allows you prevent misunderstanding in the future. It provides a record of the terms agreed on, and serves a reliable evidence of the intentions of each party. And it is recommended to have one to prevent these kinds of disputes, whether you are a small business owner, a freelancer or a big company.
Perspectives from BHL Solutions.