You should have a well-written contract for most business dealings. Otherwise, you may find your New York or worldwide company taken to arbitration or court. That is a no-win situation because even if the arbitrator or the judge decides in your favor, it can ruin your company’s name and cost a lot of money to defend yourself. Understanding the elements of a contract can help you avoid common pitfalls.
Offer
One party must offer the contract to the other. The offer should spell out what is expected and what the person submitting the contract will do to receive something in return. For example, a company might offer a web designer a contract for a fully functional website in exchange for $20,000. If the contract does not contain a specific offer in exchange for particular work, it may not be upheld in court.
Acceptance
The party that did not offer the contract must accept it. While this is typically done in writing, a contract can be accepted verbally. If the receiving party begins work on their obligations under the contract, it can also be considered accepted.
Consideration
This is the part of the contract spelling out what you will receive once the work or part of it is completed, depending on how the contract is structured. It also states what you will provide in exchange. Be very careful if intellectual property is involved because it can be tricky to get the full rights to something. A business law attorney may work to help you get what you deserve.
Meeting of the minds
This part of a contract can be challenging to prove. You generally cannot create a contract with a person who is under legal age. You may also not create a contract with a person who is not functioning with full mental capabilities. While this often applies to those with a mental condition, like Alzheimer’s, it can also apply if the person is drunk or high on drugs.
Well-written contracts are vital to profitable business operations. The next time you are entering into one, think about consulting a lawyer to ensure that the contract will hold up under scrutiny.