Business contracts are the cornerstone of commercial relationships. Without contracts, companies and business partners would have a much more challenging time conducting business with one another. A well-drafted contract can facilitate a smooth business relationship free from legal conflicts or strife, while a poorly considered one can lead to disputes and even litigation down the road.
If you’re going into contract negotiations, let the legal team at LaFountain & Wollman P.C., help. With over 40 years of combined legal experience, our attorneys have assisted business clients across various contractual agreements. Our firm offers companies trustworthy advice that puts the business’s leaders in charge of decision-making. We help business owners and executives make informed decisions throughout the contract negotiation process to develop agreements tailored to their business’s needs and goals.
Understanding Business Contracts
Business contracts represent binding agreements between two or more parties in a commercial relationship. They describe each party’s rights, responsibilities, and obligations to one another or third-party beneficiaries. Business contracts also provide terms that govern the parties’ business relationship, including how the parties may terminate their relationship or how they will resolve legal disputes that may arise. A party who fails to fulfill their obligations under a business contract may incur liability to compensate their counterparty for financial losses arising from the breach of the parties’ agreement.
Common examples of business contracts include:
- Vendor/supplier agreements
- Master service agreements/scope-of-work documents
- Employment agreements
- Independent contractor agreements
- Commercial lease agreements
- Non-disclosure agreements
- Intellectual property assignment agreements
- Asset purchase agreements
- Commercial financing agreements
- Stock/unit/partnership interest purchase agreements
- Partnership/LLC/stockholder agreements
Critical Elements of Business Contracts
A valid and enforceable business contract must include several elements:
- Definite terms: A contract must clearly describe the material terms of the parties’ agreement, including the goods, assets, or services involved, each party’s rights and obligations, payment terms, and deadlines for performing contractual obligations.
- Consideration: A valid and binding contract must have consideration, or an exchange of money, services, or goods for the other party’s performance of their contractual obligations.
- Offer and acceptance: A court must find mutual assent to a contract, which means one party offered contract terms, and the other party accepted those terms without proposing new or modified terms (which may constitute a counteroffer rather than an acceptance).
- Legality: A business contract must contemplate the performance of legal activities; parties cannot enter contracts to perform or obtain illegal services or goods.
- Capacity: Each party to a business contract must possess the mental capacity to enter the contract, which includes understanding the nature of the contract’s terms and the consequences of entering a contract. In business contracts, each party signing the contract must have legal authority to sign on behalf of a business entity such as a partnership, LLC, or corporation.
Common Issues That Arise in Business Contracts
Unfortunately, inartful contract drafting or inadequate negotiation of terms can lead to legal disputes between parties to a business contract. Some of the most common issues that arise in contractual relationships between business parties include:
- Ambiguous terms: Unclear contract terms frequently lead to legal disputes when each party believes the contract supports their preferred interpretation. Such disputes may end up in arbitration or court to have an arbitrator or judge/jury determine the correct interpretation.
- Enforceability issues: Parties may face issues enforcing a business contract due to errors in execution, such as an agreement that violates the statute of frauds or an unauthorized party signing on behalf of a business.
- Breaches of contract: Most business contract disputes arise when one party allegedly fails to perform their obligations under a contract.
- Force majeure/impossibility: Disputes can also arise when issues outside the parties’ control prevent one or both parties in a business agreement from performing their contractual obligations.
Benefits of Careful Contract Negotiation and Drafting
Hiring an experienced business law attorney can help your company create a comprehensive contractual agreement that protects your business’s interests and minimizes the risk of future disputes. A well-drafted business contract sets forth clear expectations and responsibilities for parties, which can reduce confusion over each party’s rights and roles in the relationship. Well-drafted contracts can strengthen business relationships by avoiding legal disputes that can cause mistrust and ultimately sink relationships.
Thorough contract negotiations may incorporate dispute resolution mechanisms, such as mediation or arbitration, into parties’ contracts. Alternative dispute resolution allows parties to resolve contractual disputes efficiently without the time, expense, and strife of traditional court litigation, which may allow parties to resume their business relationship once they’ve resolved their dispute.
Finally, a carefully drafted business contract provides your company with risk mitigation, reducing the chances that your business may incur liability or financial losses from a business relationship gone awry.
How Can Our Firm Help You with Your Business Contracts
At LaFountain & Wollman P.C., our experienced legal team can guide your company through contract negotiation and drafting. Our firm will work tirelessly to protect your business’s rights, interests, and future by:
- Sitting down with your business to understand your needs, goals, and objectives for your contract negotiations
- Evaluating your legal options and walking you through making informed decisions at each step of the negotiations
- Helping your business evaluate the fairness and appropriateness of proposed contract terms
- Reviewing finalized contract drafts to ensure they comprehensively cover all potential issues that may arise in your business relationship and protect your company’s interests
- Ensuring proper execution of contract documents to protect the validity and enforceability of your agreement
Contact a Business Law Attorney Today
When you need help negotiating or drafting a business contract, get experienced legal counsel who can craft an agreement protecting your business’s rights and interests. Contact LaFountain & Wollman P.C. today for a confidential consultation with an experienced business lawyer to discuss your company’s needs, goals, and interests for a potential business relationship with another party.