All formal business relationships must ensure professionalism to function better. A significant way of protecting your business and eliminating legal liability is to embrace valid contracts.
These contracts consist of the roles, responsibilities, and expectations of all the parties involved in the business. For a contract to be valid, all its elements must be in place.
How is a contract important and where is it useful?
All of us become a part of different types of contracts here and there. But are all of them taken seriously?
You only worry about the written contract as it becomes an enforceable agreement in the court of law. Here are some examples of binding contracts that are most commonly used-
- The employment contracts while hiring new employees
- Contracts of purchase/sale of goods and services
- Legal contract while investing in a business or real estate. Know more about an under contract in the real estate industry
- Contracts that involve usage of intellectual property
What makes a contract valid? Essential elements of a valid contract
Here is a list of elements that your contract must contain to be valid and enforceable in the court of law:
- Offer and acceptance: Offer is the statement presented by the promisor. It contains details of the roles, responsibilities, and terms of the contract. Acceptance ensures that the contract is formed after being properly acknowledged and examined by the promisee. An agreement becomes a binding contract once the promisee accepts it without any undue influence.
- Consideration: In all types of contracts the focus is on the exchange of the offer and acceptance. Consideration in a contract means something of interest being exchanged between the parties. An amount of money in exchange for the good or service provided is the consideration for the offeror and the good or the service is the consideration for the offeree.
- Competency of involved parties: Not everyone in the world is eligible for entering into valid contracts. The parties willing to sign a contract must have the legal capacity to do so. A minor, an intoxicated person (with drugs or alcohol), or someone with mental incapacity lacks the ability to sign contracts.
- Legality: One of the most critical components of a valid contract is legality. The contract should follow the laws of the state and should not be against the public policy in order to be an enforceable contract. The subject matter of the contract must abide by the legal terms and conditions of the contract laws.
- Writing and registration: Oral contracts might be valid but they can be voidable due to a lot of reasons like misrepresentation, undue influence, etc. It is better to have contracts in writing and registered according to the existing law. The Statute of frauds states that certain contracts need to be in writing to evidence it later.
- Mutuality: It means all the parties involved in a contract are aware of the terms and conditions that govern it, and they agree to it. Even if one party is not bound to the contract, the contract will become void.
How is a valid contract beneficial for you?
Well drafted contracts have a lot of advantages for you and for your business that are mentioned here –
- Clarity in business relationships: Properly documented business contracts bring transparency and trust among the partners. It unveils the expectations of all the partners involved in a particular association.
- Clarity in the rights of the parties: A contract is an output of two or more parties agreeing to a set of terms and conditions. It is crucial for each party to be aware of their rights and obligations for smooth functioning.
- Elimination of unwanted disputes and litigations: With clearly laid out roles, promises, and rights, a valid contract leaves no room for any misunderstanding or blame game in a professional bond.
- Protection of intellectual property(IP) and other assets: The value of a business is largely based on its IP assets. A contract safeguards the IP rights of all the parties from getting violated.
- Proper documentation for further reviews: Oral contracts are acceptable but they are not justifiable in case of breach of contract or when confusion arises. To avoid any of these situations a written contract is crucial.
- Better overall management: Commercial relationships are delicate. Clear communication and mutuality also referred to as meeting of the minds are important ingredients to a successful business relationship. A valid contract helps you achieve this easily.
Leverage templates to create your contracts
A legal contract has to be drafted mindfully with accurate details as incorrect information or a missing critical clause can lead to serious consequences. You will end up wasting a lot of time and can make silly mistakes if you create every contract from scratch. In such cases, you can leverage document templates to create digital contracts that are legally and aesthetically rich and offer a lot of benefits like –
- Provides a simplified way of creating documents
- Ensures standardization in design
- Saves time and money
- Helps improve work efficiency
Revv: the right tool
Revv is an efficient document builder designed to help businesses with crucial trustworthy documents. It provides users with a rich templates library that contains easy to edit business document templates. These are drafted and designed by a legal team and skilled graphic designers.
You can sign in and select a contract template as per your requirements. Revv also enables you to collaborate seamlessly with your team and track their progress within the contract you send across (who viewed, signed, etc.).
You can add eSign blocks in the contract and leave behind the worries of a sloppy approval process.
All in all!
Nothing is real until the contract is signed. If you want to get away from uninvited troubles and disputes and stay in a sound mind, invest time and energy in a written contract. If you are on the fence about anything, then consider taking legal advice from a contract law expert who knows your state’s laws inside out.
Leverage tools like Revv to hit all your contract jackpots. It lets you easily draft and optimize your business contracts online.