Business Contracts

Contracts and agreements
The world is full misunderstanding and betrayal. These problems can be curbed by a legal act called contract. A business contract is a legally binding agreement between two or more persons or entities.
What is business contract?
Verbal(spoken)and written contracts
Fundamental elements of a contract
General terms and structure of an agreement
Standard form contracts and unfair terms
Before signing a contract
Closing a contract
NOTE: Many contracts can be complex. Before signing a contract,it is very needed,that you get the complete understanding of the business contract. Do well to seek legal and professional advice first.
What is business contract
Running contract deals is part of running even a small business. You must encounter couple of business affinities involving some type of contractual commitment or obligation.
You may:
be buying goods and services- as a borrower of money,running business that involves rental agreements.
be a supplier of goods and services -retailer, wholesaler, independent contractor
have a partnering agreement with other businesses – partnerships, joint ventures, consortium.
Managing your contracts and business relationships is very important.
NOTE: Don’t be ignorant that most contracts entered into will involve goods and services tax (GST) implications.
Verbal(spoken) and written contracts
Contracts can be said out with mouth ie verbal, written or a combination of both. Some types of contract must be in writing,example is a real estate business contract,financial agreement contract.
Written contracts may consist of a standard form agreement or a letter confirming the agreement.
Verbal agreements are not really reliable as it is actually based on trust. If such agreement goes wrong,it will lack evidence to prove.
Therefore, written contract takes upper hand in acceptance by business men.
Every contract,not minding whether it’s handwritten or verbal must contain four fundamental elements.
Fundamental elements of a contract
For a contract to be said to be legally binding it must contain four fundamental elements:
an offer
an acceptance
a motive to create a legal relationship
a consideration (usually money).
However it may still be regarded invalid if it:
lures a person to commit a crime, or is illegal,or is entered into by a person that is known to be less capable, bankrupt or a minor.
was agreed via misleading or deceptive conduct, duress, unconscionable approach or undue influence.
General terms and structure of an agreement
A contract must follow a particular format. Generally it includes some terms, either expressed or implied, which will form the basis on which the agreement will be made. These terms may outline contract conditions or contract warranties.
Contract terms are fundamental to the agreement. If the contract conditions are not met it is possible to terminate the contract and seek compensation or damages.
Contract warranties are less important terms and not fundamental to the agreement. You cannot terminate a contract if the warranties are not fulfilled, however, you may be able to seek compensation for any losses incurred.
When negotiating the contract terms make sure the conditions of the contract are clearly defined and agreed to by all parties.
Contracts may follow a structure that can include, but are not limited to, the following items:
details of the parties to the contract, including any sub-contracting arrangements
duration or period of the contract
definitions of key terms used within the contract
a description of the goods and/or services that your business will receive or provide, including key deliverables
payment details and dates, including whether interest will be applied to late payments
key dates and milestones
required insurance and indemnity provisions
guarantee provisions, including director’s guarantees
damages or penalty provisions
renegotiation or renewal options
complaints and dispute resolution process
termination conditions
special conditions
NOTE: In almost all cases of creative work (such as a logo you pay to have designed) copyright will remain with the creator, regardless of whether they created it on your behalf. If you engage a contractor to produce material that attracts copyright protection make sure the contract includes assignment of these protections, so that you own all the rights to the materials you paid to have created.
Standard form contracts and unfair terms
A standard form contract is a pre-prepared contract where most of the terms are set in advance with little or no negotiation between the parties. These contracts are usually printed with only a few blank spaces for adding names, signatures, dates etc.
Examples of standard form contracts can include:
employment contracts
lease agreements
insurance agreements
financial agreements
Standard form contracts are generally written to benefit the interests of the person offering the contract. It is possible to negotiate the terms of a standard form contract. However in some cases your only option may be to ‘take it or leave it’. You should read the entire contract, including the fine print, before signing.
If you intend to offer standard form contracts you must not include terms that are considered unfair. This could include terms that:
allow one party (but not another) to avoid or limit their obligations
allow one party (but not the other) to terminate the contract
penalise one party (but not another) for breaching or terminating the contract
allow one party (but not another) to vary the terms of the contract.
There are laws protecting consumers from unfair contract terms in circumstances where they had little or no opportunity to negotiate with businesses (such as standard form contracts).
Unfair contract terms and small businesses

Before signing a contract
Before you sign a contract:
make sure that you get all the words read, including the fine print
ensure that it reflects the terms and conditions that were negotiated
seek legal advice
allow plenty of time to consider and understand the contract
don’t be pressured into signing anything if you are unsure
never leave blank spaces on a signed contract – cross them out if you have nothing to add so they cannot be altered later
see that you and the other party initial any changes to the contract
obtain a copy of the signed contract for your records.
Once a contract has been signed by you,you may not be able to get out of it without compensating the other party for their genuine loss and expenses. Compensation to the other party could include additional court costs if the other party takes their claim against you to court. Some contracts may allow you to terminate early, with or without having to pay compensation to the other party. You should seek legal advice if you want to include an opting-out clause.
NOTE: If it is not possible to have a written contract make sure you have other documentation such as emails, quotes, or notes about your discussions to help you identify what was agreed.
Closing a contract
Most contracts end once the work is complete and payment has been made.Be it building contract or any other contract.
Contracts can also end:
by agreement – both parties agree to end contract even before the work is completed.
by frustration – where the contract cannot continue due to some unforeseen circumstances outside the parties’ control.
for convenience – where the contract allows a party to terminate at any time by providing notice to the other party.
due to a breach – where one party has not complied with an essential contract condition, the other party may decide to terminate the contract and seek compensation or damages.
If a contract warranty or minor term has been breached it is unlikely that it can be terminated, though the other party may seek compensation or damages.
Some contracts may specify what will be payable if there is a breach. This is often called liquidated damages.
If there is a challenge regarding the contract, it is necessary that both parties talk clearly to attempt to resolve the matter. You may consider using our low-cost Alternative Dispute Resolution (ADR) service or seek legal advice to help resolve your dispute.

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