Corporate contracts are the most effective form of revenue for millions of small businesses nationwide. An estimated 27 percent of federal contracts went to small businesses in the United States of America, and that fails to include business-to-business contracts that are in place. Knowing the elements of business contracts is vital if you want to make headway as a business owner.
Your unilateral contracts provide protection in court should the other party look to take advantage of your company. A lack of attention to detail with your business contracts will quickly put your business in a dangerous spot.
The good news is that you’ve found the perfect guide to learning about the seven critical elements of a business contract. Keep reading to master commercial transactions for your company today!
1. Contract Classification
Part of drawing up a corporate contract is knowing its classification. Most businesses operate using simple agreements. The three ways contracts get agreed upon are through writing, verbal, or actions.
Bilateral contracts are one of the most common forms of commercial contracts. These contracts require both parties to uphold their end of the bargain. A bilateral contract starts when one party agrees to exchange something with the other party for something else.
Selling your products to customers is an excellent example of a bilateral contract. The customer is required to provide payment upon receiving your products.
Unilateral contracts are quite different from bilateral business contracts. These contracts provide payment for a specific action by the other party. Returning a lost or stolen item to someone in exchange for a reward is a unilateral contract agreement. You can hire corporate legal services for help drawing up contracts.
2. The Offer
An offer must be made for a contract to begin between two parties or businesses. The proposal should always include the offer’s details, especially the terms, and conditions within the agreement. It’s your attempt to enter into a contract with another business, and you must lay out the terms for the other party to agree.
Your offer should be clear and definite when communicating it to the other party or business. A binding contract occurs when the other party accepts your terms and conditions for an agreement.
You can make your offer directly or indirectly. An indirect offer is made through an invitation to treat with your business. It’s an excellent option if you want something other than a legally binding contract. Look at an invitation to treat as part of the negotiation process.
A direct offer doesn’t allow for negotiation. You offer clear and definite terms to the other party. You’ve entered into a binding bilateral contract if they accept your offer.
The next element of corporate contacts is acceptance. The offer can only get accepted once it’s in the hands of the other party. They can review the terms and decide if they wish to accept or decline your contract offer.
The other party can accept the offer through email, mail, or verbally over the phone or in person. Hire a lawyer to dive into your state’s laws regarding mutual assent when moving forward with an agreed contract.
Many states use a mailbox rule, vital for accepting a contract through mail or email. The law states that the contract is agreed upon when the mail enters the mailbox or the email is sent. You should view the agreement as accepted as soon as either of these responses occurs.
The contract is agreed upon regardless of whether you receive the response. That said, the other party must clearly accept all terms and conditions.
4. Meeting of the Minds
After acceptance, a meeting of the minds must occur for the corporate contract. This happens when both parties agree to and recognize the contract that you’ve drawn up. You’re both now obligated to abide by the conditions set out in the contract.
Some lawyers refer to a meeting of the minds as mutual assent or agreement. The contract is officially in place when mutual assent occurs, though you can still void the contract if needed. The primary ways to void the contract are duress, fraud, or misrepresentation.
The consideration stage of a corporate contract involves exchanging something of value to solidify the legal agreement between your business and the other party. The main things offered during the consideration stage are products, services, property, or protection. These things are offered in exchange for money.
If you choose not to trade money between the two businesses, ensure the court will accept the assets you’re swapping. If the court does not see consideration for the assets offered, the deal could become null and void.
Capacity is another crucial element when entering a contract with another business or party. Both parties must have the capacity to meet the contract’s stipulations for it to become binding. You can’t enter into a contract with someone or something incapable of holding up the other side.
Both parties must be in the right state of mind to enter into a legal agreement and contract. The contract is void if either party is under a mind-altering substance.
The last element of a corporate contract is its legality. You cannot enter into a contract to sell or trade illegal items or services. A drug dealer is incapable of enforcing a contract with a customer who is unwilling to pay them.
Both parties need to have legal intent for the corporate contract to be valid. Your business lawyer will help you maintain these elements for successful business contracts.
Draw Your First Corporate Contract Today
Writing up a corporate contract is essential if you plan to work with clients and other businesses to increase your revenue and spread your influence. Working with a business lawyer to enter bilateral and unilateral contracts is wise, as is knowing the proper steps to create a binding contract. You’ll enjoy peace of mind when handling corporate transactions with your new expertise.
Are you ready to start growing your small business? Check out the rest of our blog articles for more valuable business advice today!