Contracts are an essential part of doing business throughout the United States. A contract is a formalized agreement between two parties in which each agrees to certain obligations in exchange for certain rewards or benefits. It is a form of communication, which makes sure that all sides understand what they are required to do and what they can expect to receive in return. They define relationships and allocate risks and benefits, which can then be enforced by a court.
What Do I Need to Know About Business Contracts?
Here’s what everyone should know about business contracts and how they work:
1. You may have made a contract today already–and not even realized it.
The traditional elements of a contract are an offer, acceptance of that offer, and consideration, or the receipt of something in exchange for doing something else. While some contracts must be in writing to be valid, not all have to be.
Most people make dozens of contracts a day. When you swipe your credit card at the gas pump, for example, you’re entering into a contract: you’re signaling that you accept the deal to buy gasoline at the price shown on the sign (the offer). When you pump the gas in exchange for the money charged to your card, you’re operating under a contract.
Most of the contracts people make don’t need to be examined by a lawyer, written down, or enforced in court. Some, however, do.
2. “Boilerplate” is real (and enforceable).
It’s easy to think of “boilerplate” or “fine print” as something that adds weight (and length) to a contract, but isn’t particularly important. Very few people take the time to read all of the boilerplate language on contracts or forms they sign every day, such as the repair bill at an auto shop or the print on the back of a movie or bus ticket.
When you’re making a business contract, however, it’s important to understand every word, because every word has a certain legal effect—and if you don’t know what the “boilerplate” language says, you could be agreeing to a deal you never wanted to make.
3. Contracts can reduce bad behavior, but they can’t always prevent it.
Contracts are an excellent way to clarify expectations, make sure every party knows exactly what is expected of them, and compartmentalize problems into specific issues so that you can focus on the rest of the business while a dispute is pending. This is why they are such commonly-used business tools.
A contract cannot, however, solve everything. If you know that the supplier you’re contracting with has a habit of late deliveries, partial payments, or terrible customer service, a contract alone will not magically reform their behavior. It’s important to understand what contracts can and cannot do—and to think carefully about whether the other party is someone you want to contract with.
Entering a Contract? Work With an Experienced Business Lawyer
Planning to start, expand, sell, or buy into a business? Attorney Jonathan D. Schmidt can help you ensure you’re protected and that the contracts you’re asked to sign do in fact support and reflect the agreement you wish to make. To schedule a consultation, contact Jonathan D. Schmidt today at (319) 423-3031.