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7 Essential Elements for Your Business Contracts

Contracts are the cornerstones of many businesses, as they define various crucial business relationships, include those between a business and its employees, vendors, distributors, etc. Whether you are just getting your business started or your business has been operating for some time, knowing the fundamental elements that business contracts should include can be essential to:

  • Developing good business contracts
  • Recognizing and not signing poorly devised business contracts
  • Protecting your business and positioning it for success in the future.

In this blog series, we will highlight some of the most essential elements of valid business contracts. If you need assistance with business contracts or any legal issue affecting your business, don’t hesitate to contact Denver Business Lawyer Thomas E. Downey. He has the experience, knowledge and integrity you can count on to successfully resolve all of your business legal issues.

Here’s What Business Contracts Should Include…

1. A description of the involved parties

justice scales and court gavel

First off, business contracts should clearly identify the entities that will be a party to the contract. In particular, this description should specify:

  • For individuals contracting with businesses – The individual’s name, title and (when applicable) the organization that the individual may be representing
  • For other entities – The name of the entity (e.g., the business, agency, organization, etc.)

Here, it’s also conventional to include contact information (like a phone number and/or email address) for the other party entering into business contracts.

2. Specific terms

Once the parties of business contracts have been clearly identified in the contract, next, it will be important to detail the specific terms regarding the services and/or products to be rendered and/or the nature of the proposed relationship between a business and the other party entering into the contract with the business.

In this section of business contracts, some of the specifics to include can be the following (depending, of course, on the nature of the contract):

  • The quantity of products to be rendered
  • The nature of the services to be provided
  • The length of the proposed relationship between the business and the other party (e.g., whether this will be a relationship for a single project or whether it may be ongoing, seasonal, etc.)
  • The start date for the contract.

Resuming 7 Essential Elements for Your Business Contracts (Pt. 1), below, we will continue to point out some critical components to contain in your business contracts.

Additional Important Provisions for Business Contracts

3. Provisions regarding the deliverables

man signing document

Another critical component of business contracts is having terms that detail the expectations regarding the deliverables associated with the contract. For instance, if your business will be selling X products to a distributor every month by the 5th of the month, then these details should be specifically included in the contract.

Additional details that may need to be included in this aspect of business contracts can include (but may not necessarily be limited to):

  • How the products or deliverables will be provided
  • Which party is responsible for covering the costs of delivery
  • What may happen if the deliverables are late
  • How the deliverables will be tracked and who will oversee them (for both parties of the contract).

4. Provisions regarding compensation

For this section of business contracts, it will be imperative to explicitly detail what the payment or compensation will be for the delivered products, services, etc. In particular, compensation provisions of business contracts should generally include details regarding:

  • How much one party will pay the other for the services, products, etc. pertaining to the contract
  • When the payments will be made (monthly, quarterly, annually?)
  • The form of the payments to be made (for instance, will the payment be via credit, direct deposit or some other form?)
  • Whether there may be any upfront payments required
  • Whether there may be additional costs or expenses (like, for instance, shipping or courier fees) related to the delivery of the contracted services, products, etc.

Be sure to look for the upcoming conclusion to this blog series!

Wrapping up our blog series 7 Essential Elements for Your Business Contracts, here, we will point out some final critical components to include in legal contracts for your business.

Additional Important Terms to Include in Business Contracts

5. Provisions regarding modifying or terminating the contract

team watching handshake after deal made

Even extremely well-drafted business contracts may need to be modified or terminated altogether when the circumstances of any party in these contracts may change. Therefore, having business contracts include specific terms regarding how modifications or the termination of these contracts should proceed can be essential to:

  • Reducing the possibility that a contract-related dispute will arise
  • Effectively changing or ending a contract without excessive cost, time or effort
  • Preserving business relationships.

Here, it’s also important to note that, when developing provisions regarding the modification or termination of business contracts, it’s usually best to do so with the help of an experienced business attorney who can assist your business in devising terms appropriate (and preferable) for your business.

6. Provisions regarding the legal consequences of breaching the contract

Although you may not want to think about breaches of your business contracts, planning for the worst cases is critical to protecting your business when entering into any contracts. To this end, be sure to include terms regarding the legal actions that may be taken if business contracts are breached.

For instance, you may want to stipulate in these provisions of business contracts that, in the event of an alleged breach of contract:

  • Both parties agree to enter into arbitration (or mediation).
  • The dispute resolution process will take place in the state in which your business is located (so that your state’s laws will apply to the given dispute).
  • The losing party will cover the winning party’s legal fees.
  • There may (or may not) be other damages available in the event that it’s ruled that business contracts have been breached.

7. Appropriate authorization

Finally, all business contracts should include a place to authorize (sign) and date the contract to enact it. This should include a spot for all appropriate authorities or signatories to sign the contract (with each party’s full legal name, as well as the party that an individual represents, being clearly spelled out beneath the space provided for authorization).

Denver Business Lawyer at Downey & Associates, PC

If you need help developing business contracts or dealing with any legal issue related to your business, you can count on Denver Business Lawyer Thomas E. Downey. Since 1983, Thomas Downey and the other legal professionals at Downey & Associates, PC, have been providing individuals and businesses in the Denver Metro Area and throughout the U.S. with the highest level of legal service for their business legal issues.

Our dedication to our clients, coupled with our extensive experience handling complex matters of corporate law, means that our clients can always trust that we will aggressively protect their rights and help them achieve the best possible outcomes to their sensitive legal matters.

Contact Us Today

We encourage you to learn more about your rights and options, as well as our various services, by calling us at (303) 813-1111 or by emailing us using the contact form on this page.

From our law offices in Centennial, we serve clients throughout Colorado and the U.S.

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