Business contracts are comprised of several key elements. These elements are included to make sure that all of the contents of the contract are legally binding. The key business contract elements also help to prevent misunderstandings that could occur if they were omitted. The key elements of a business contact are:
The parties. The contract must clearly and specifically identify the parties to the agreement. If one of the parties is a corporation
or other business entity, that must be so stated. The roles of the parties must also be specified, indicating who is the seller and who is the buyer. One party is usually the business that is paying for a product or service. An owner or manager typically includes her name in the payee spot. The other party is the service company or supplier. Each party must be giving something of value in return for receiving something of value, which is legally known as mutual consideration.
The agreement. Legally called the consideration, the agreement could be only a sentence or two in length. It includes a general statement of what the service or product provider is expected to do for the buyer. The agreement also indicates whether other parties are expected to complete part of the work.
Terms. More detailed information about the deal is included in the terms section of the business contract. This section spells out exactly what services or products are expected from the company doing the work. The terms section also includes the price, details of the payment, the length of the contract and when the services or products will be delivered. Some business contracts also include special terms, such as whether the contract can be canceled for any particular reason. For example, contracts that violate public policy or are not signed voluntarily are voidable, according to “Reference for Business” online. Special terms of a business contract also can indicate whether the buying party may transfer the contract to someone else.
The date. The date usually appears in at least two areas: within the contract where both parties entered their names or business names and next to each parties’ signatures. A date also might appear at the top of the contract, indicating when the contract was created. Businesses or lawyers who create business contracts usually include the date the transaction takes place at the top of the contract.
Signatures. The business contract must be signed by both parties. This indicates that the buyer accepts the payment conditions and the seller agrees to complete the work. The parties must document their consent to the terms and clauses of the contract by means of a signature. In the case of a business entity, this often requires the placement of the entity’s official seal on the contract. This is all referred to legally as the contract execution. Sometimes the contract execution will also be witnessed as indicated by the seal of a third-party notary.