A Business Contract is an agreement which is made between any two organizations, parties with mutual consent after their decision or agreement to enter in business relationship with one another. This contract is in other words a legal enforceable promise to abide one another for mutual sharing of the profits and losses in accordance with the already decided or signed obligations. The use of the business contract while entering in some new business relationships as it ensures any sort of the damages that may come across while dealing with a new or stranger firm. In case the contract is over ruled, this may result in a lawsuit, or legal act against the person responsible to breach the law.
The business contracts can be;
Oral Business Contracts:
When people discuss terms and conditions orally as parties and they don’t bother to write it down. Such contracts are also very effective but on the other hand such cases may misinterpret some legal aspects. Hence such contracts are difficult to prove in the courts.
Written Business Contract:
Such business contract in which the terms and conditions are laid down in written form with signatures of both the parties is called as written business contract. This is easier to handle and proper record of everything is made on behalf of both the parties.
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Essential elements of a Business Contract:
The essential elements of a successful contract are as follows;
- The name and details of the parties which are willing to enter in this business contract.
- The date and time of the day of signing the contract.
- The nature and complete account of the business activities.
- Any sort of the information or the business knowledge or technology.
- The payment clauses between the two parties should be clearly indicated.
- Any sort of other obligations or terms and conditions which the two parties want each other to oblige.
- The terms and conditions for the profits and losses along with the relevant calculation formula.
- The time period for which the contract will be duly effective between the two organizations.
- The compensations in case of breach of the contract imposed by one party on the other one.
- The legal restriction of the business relations and obligatory instructions for the use of these relations within certain limits.
- The court or jurisdiction to contact in case of any lawsuit.
Use of the Business Contract:
- This contract is helpful while hiring a vendor, contractor or while reviewing the services and business options.
- This is to use while selling a business.
- To enter in joint partnerships
- Important for signing some sort of confidentiality agreements
- Important for entering in some lending and borrowing needs