Sometimes business relationships go awry which is why it is useful to have a good handle on what should be included in a business contract and what makes a business contract valid. Having contracts to protect various business interests is important for business owners who routinely rely on contracts in their business relationships.
Important elements of a business contract
Important elements of a business contract include:
- Offer: to start a contract relationship, there must be an offer for goods or services.
- Acceptance: to form a contract, there must be an acceptance of the offer for goods and services and the acceptance must mirror the offer exactly.
- Consideration: consideration is an element of a contract that is sometimes confusing. It requires an exchange of something of value between the parties to the contract. It can be money but does not have to be. It can also be a promise to take a certain action or refrain from taking an action.
- Mutuality: mutuality requires that both parties to the business contract assent to the terms of the contract.
- Legality: the subject matter of the contract must be legal for it to be considered a valid contract.
- Capacity: both parties to the busines contract must be 18 years old or older and must enter the contract knowingly and voluntarily. That means there cannot be any duress, coercion or undue influence in the formation of the contract for it to be considered valid.
Knowledge of contract basics can be helpful when faced with a contract dispute and to help avoid contract disputes before they arise when drafting a contract. Contracts are be a vital part of the protecting the interests of a business and are worth understanding.
