What Business Owners Need to Know About Contracts

Contracts are the very heartbeat of business and we’re not kidding when we say there is a contract for everything. Looking to secure the services of a professional? Sign a contract. Looking to hire an assistant? Sign a contract. Need access to information from a website? Sign a contract. For any business, you need ironclad contracts to stay in the game and legally protect yourself.

Types of Contracts for Business Owners

Some of the most common contracts for business owners include:

Employment Contracts
Confidentiality Agreements
Service Contracts
Website Terms of Agreements
ADA Disclosures
Letters of Intent
Real Estate and Lease Agreements
Loan Agreements
Release of Liability
Non-Disclosure Agreements
Independent Contractor Agreements
Client Agreements
LLC Operating Agreements
Subscription Membership Contracts
Licensing Agreements
Affiliate Agreements
Consent to Photograph

Contract Questions?

We are aware of how important it is to protect every aspect of your business through contracts. We can help you decide what contracts you need with experience and efficiency.

Get a Free Consultation

When Do You Need a Contract?

In business, you need a contract for every relationship your business enters into. A good rule of thumb is that in person, you treat your contract partners like friends, but on paper, you treat them like fr-enemies. There are countless stories about good people who exchange services with other parties, but you have no contract because you don't want to insult them. Then, at some point, there is a dispute…

Everybody you do business with is an enemy. If things go well, the contract is unnecessary but available, and if things go bad, you have contractual protection.

You need contracts with your vendors and suppliers, the parties with whom you are the vendor or supplier, your employees, and anyone else you do business with either once or regularly. If there is a party that has the capability of taking something from you without compensation, you need a contract.

How Can Business Owners Benefit From Contracts?

Contracts are the representation of a relationship. Two or more parties identify what they need from another party, and compensate that party for fulfilling that need. For business owners this can look like a service agreement, employment contract, or purchase contract. While it may seem like legal overkill, a contract has real legal benefits for business owners.

A Legally Enforceable Record of an Agreement

The main purpose of a contract is that it serves as a legally enforceable record of an agreement between two or more parties. Each party involved benefits and sacrifices. The contract memorializes the agreement so that they can hold the other party responsible for fulfilling their end of the agreement.

Mitigation of Risk

A well-drawn-up contract also mitigates the risk of each party. If one party contractually agrees to pay for a good, the party that has paid shouldn't have to worry about receiving those goods. If the other party fails to deliver, the buying party can take legal action.

Helps Prevent Conflicts

A well-drawn-up contract clearly defines the terms of the agreement, describing exactly what each parties' obligations are, and provides remedies for any breach of the contract. When a parties' obligations are clearly stated, it has no grounds to argue about those obligations. When the remedies for a breach of contract are clearly stated, the breaching party has no grounds to challenge what the consequences of the breach will be.

Tips for Creating an Effective Contract

So, what is a "well-drawn-up" contract? There are some simple tips for making sure your contract is easily enforceable, including:

Do it in writing. "Handshake" deals, or verbal agreements, are technically enforceable but almost impossible to prove.
Go with a pro. Use an attorney, such as the experienced contract lawyers at Gilormo Law. If you aren't familiar with contract law, don't just copy what you find online or cobble together your own. Samples you find online can be way too generalized to address your specific needs and are often missing the necessary clauses to make them enforceable.
Buy a template. If you can't afford an attorney or don't want to pay for one, use a high-quality contract template like the ones we sell on The Boutique Lawyer. A good template will be specific to your industry and written in plain English so you can understand how it protects you.
Clearly identify the parties. For example, if you're dealing with an LLC, use the name of the LLC, including the suffix LLC, rather than the name of the individual signing the contract.
Details, details, and more details. Be specific with the terms of the agreement, especially the obligations of each party and the remedies for any type of breach.
Location matters. Pick the jurisdiction that any lawsuit will take place, and which state's law controls. You'd like to have a home-field advantage, especially if the other party is far away. It's a lot easier to litigate in your home state than to fly across the country.
Use language to your advantage. If you are the party drawing up the contract, be sure to insert a clause that does not hold the burden of ambiguous language against the drafting party.
Remember confidentiality. Be sure to insert a confidentiality clause.
Plan for a dispute. Agree on how disputes will be handled. Your attorney may advise mandatory mediation or arbitration.
Agree on what circumstances the contract may be terminated. In any event, there must be some time limit, but you may want to have the right to terminate under other circumstances.

What Makes a Contract Valid?

A contract is more than an agreement. There are certain requirements that make a contract legally binding.

Mutual Assent

Mutual assent is typically broken down into an "offer" and an "acceptance." An offer is made when a party proposes some type of exchange and an acceptance is when another party agrees. At this point, for example when the offer is accepted, the parties have mutually agreed to enter into a contract and both parties are obliged to make the exchange. Both offers and acceptances must be explicit in a contract.

Adequate Consideration

Consideration means both parties have given up something for value. It doesn't matter if the deal seems fair or not.

Legal Capacity

Legal capacity refers to a person's legal ability to enter into a contract (their age, mental state, etc.) In most states, parties must be of an age of maturity (typically 18 years old). Therefore, a 16-year-old person does not have the legal capacity to enter into a contract. In court, the contract would be considered unenforceable. A person must also be considered mentally competent to enter into a valid contract.

Legality of the Contract

A contract needs to have a legal purpose to be enforceable. For example, a contract related to illegal goods or substances would not hold up in court.

Does Your Contract Address Your Specific Needs?

Depending on your business structure, you likely have specific needs for securing and protecting your services with your clients. Every industry has different concerns and these concerns are addressed via contracts with provisions for that sectors’ needs. A hair stylist has different concerns than a photographer, who requires an extra clause that the freelance writer doesn’t need.

For example, a makeup artist will need client contracts that have verbiage related to no-show appointments, or cosmetic allergies. The unique industry-specific content can prevent misunderstandings, preserve your most essential business relationships, minimize your financial risk and outline allowances for circumstances beyond your control.