Contract Terms

Contract Terms

A contract is generally an agreement between two or more parties that is legally binding. Businesses often enter into contracts with other businesses. Business owners and managers need to understand basic contract terms. This knowledge is important in the daily operations of their businesses. The current essay defines some of the main contract terms applicable in the business world.

An offer

There can be no business contract without an offer. One party should come up with an offer (Harris & Croese, 2016). The party that gives the offer is referred to as the offeror.

Acceptance

The offer proposed has to be accepted by the other party (Harris & Croese, 2016). The party which accepts the given offer is called the offeree.

Consideration

Business contracts often involve promises that the parties are expected to fulfill. These promises comprise considerations (Chizhikova, 2020). In most cases, property, money, services and other things that have legal value are exchanged as part of the considerations.

Agreement

Any contract must be based on a mutual agreement reached between the parties involved (Odell, 2019).

Recitals

A good contract should have certain clauses at the beginning that explain the reason as to why parties have entered into a contract (Odell, 2019). Such clauses are known as recitals.

Conditions

Most business contracts have certain conditions that parties should meet (Simons, 2018). The conditions help to protect the contracts.

Contractual Capacity

Each of the parties that sign a contract must have the legal capacity of assuming the set contractual responsibilities and duties (Odell, 2019). Full capacity can be limited by mental illnesses, intoxication, and other serious states.

Lawful Object

The reason as to why a contract is signed is to ensure that it is legal (Harris & Croese, 2016). Therefore, any contract that leads to unlawful act is null and void.

Duties

Most contracts specify the duties of the involved parties (Simons, 2018). This helps to ensure to ensure that the parties do not do what is not in the contract.

Rights

The rights of each of the parties are often set out by contracts (Simons, 2018). These rights must be respected.

Dates

Dates are important in any given contract (Rose & Leibowitz, 2017). They show when a contract is supposed to begin and end.

Confidentiality

Contracting parties sometimes agree on keeping the terms of their agreement confidential (Odell, 2019). This helps to ensure that the information does not get out to competitors.

Payment

Business contracts usually specify the amount of money that has to be paid out (Chizhikova, 2020). They also give specifications on the mode of payment.

Breach

If one of the parties in a contract decides not to perform its duties, it is said to have breached the contract (Simons, 2018). A breach of contract can necessitate a legal action.

Termination

Business contracts often give guidelines on the process of their termination (Chizhikova, 2020). Termination of contract normally occurs when a party fails to meet some conditions.

Damages

Damages comprise remedies for the breach of a contract that is valid (Rose & Leibowitz, 2017). They can be in form of money or other awards that serve as compensation.

References:

Chizhikova, Y. (2020). How to Conclude a Contract: the Real Business Contract Management: For Entrepreneurs and Managers. New York: Amazon Digital Services LLC – KDP Print.

Harris, J., & Croese C. (2016). Understanding Business Contracts. (2014). North Ryde, NSW: CCH Australia.

Odell, K. (2019). Do you know what contracts you are entering into? Practice Management, 29 (9): 1479-2818. https://doi.org/10.12968/prma.2019.29.9.34

Rose, A., & Leibowitz, D. (2017). Getting Out of a Contract – A Practical Guide for Business. London: Taylor & Francis.

Simons, J. (2018). Unfair contract terms and small business contracts: Lessons from initial enforcement actions. Bulletin (Law Society of South Australia), 40 (9): 17-19.