How to Write a Business Contract?

It is important for small and large business owners to have both an intuitive understanding and legal knowledge of how to protect their company and ensure its profitable activities. To this end, a business contract is created. It is a great way to achieve business goals and ensure protection while complying with the legislation. Business contracts provide a detailed record of the transaction and are of great help when disputes arise.

If the agreement is not drafted correctly, it can have negative consequences. Written business contracts are used quite rarely. These are legal documents that are created to define a contractual relationship. This type of contract is not always enforceable. It may spell out terms that define certain offers and other specific provisions.

Writing a Business Contract

Written business contracts are the essential basis for internal and external transactions. Agreements are subjected to a certain life cycle. It is important to keep in mind that they need to be carefully managed in order to achieve the desired results. Regardless of the type of business, most owners must establish the right process. There are three basic steps for writing a business contract:

1. Preparation of legal grounds and documents. The first thing to do is to determine the type of document you need and the issues it should address. If you run a large business, you should have a person responsible for contracts and cooperation with the legal department. If you have a small business, you need to continually research the options that will be appropriate for a particular type of activity, as well as look into industry contract negotiations. It will be necessary to assign employees who will be responsible for achieving the best outcome.
2. Pre-contract planning. This item consists of legally drafting the initial version of your contract. You need to read the contract content to learn about the various terms and conditions for suitable agreements. Note that you should negotiate terms that are fair and beneficial to both parties.
3. Implementation. When you reach a mutual agreement with your partner, you need to print the contract and send it to all parties to sign. The offering party should keep the original and provide the others with copies.

These are just some key aspects to consider when drawing up a contract.

Components of a Business Contract

Business proposals are used in almost every industry. They have great features and possibilities that must be embraced before a contract can be signed (and you can read the full article here to learn about just one of these possibilities – a force majeure) . A company must understand all written points of the agreement and their basics before signing a contract. Here’s a look at the different provisions that are contained in most business contracts:

1. Privacy. This is one important component that must maintain the competitive advantage of the business. Such clauses limit the interests of stakeholders, and suppliers can discuss internal practices. A confidentiality clause can be bilateral or unilateral. In either case, it is better when both parties agree not to disclose confidential information about each other.
2. Force Majeure. Unforeseen situations can arise at any time. If a force majeure clause is included in the contract, this can protect the company from situations that are out of its control. If we take a look into recent unforeseeable events, the COVID-19 pandemic could be one of them.
3. Termination. The contract should necessarily have a clause about the possibility of terminating the contract without sanctions and penalties. The situation may not always go according to plan and such a clause will be useful to protect your business.
4. Choice of Law. This clause should specify what laws it provides for. It is recommended that the legal department is involved on this point to get rid of any confusion as to what rights of choice the parties to the contract have.
5. Dispute Resolution. Having a contract is not a guarantee that you won’t have any issues. Dispute resolution is a required clause in any contract. Most companies use an arbitration clause at such a point and prefer to choose the settlement in court.
6. Damages. This is a legal term that defines financial or economic loss. Damages can be caused either by negligence or by the intentional misconduct of one of the parties. Business contracts should clearly state when you must pay damages, compensations, as well as consequences, such as the penalty, that you have to pay for not doing so.

To draw up a contract, you can use a ready-to-use template. Pandadoc has an excellent library of templates that users can take advantage of.

Types of Business Contracts

We recommend that you familiarize yourself with the main types of business contracts, such as:

• purchase and sale agreement – it is a common version of a transaction that is made between a buyer and a seller;
• partnership agreement – it features transactions between business partners;
• commercial lease – this is an agreement between a company and a landlord;
• confidentiality agreement – both parties agree not to disclose confidential information about each other;
• asset purchase agreement – it stipulates the purchase of assets in tangible and intangible forms.

Choose the appropriate version of the agreement and draft it correctly. If you have doubts, it is better to consult lawyers.