We enter into contracts all the time for business and personal reasons. Whether it is a purchase of a ticket to an event or the purchase of a house, almost everything we purchase involves a contract.
Think about this.
How many times have you clicked to accept the “terms and conditions” of a purchase online? Pretty much every time you buy something on the internet, right? By clicking that you accept them, you are entering into a contract with the seller of that product or service.
There is an important reason why companies always ask you to approve the terms and conditions.
It doesn’t matter whether or not you are entering into a relationship with a customer, with a vendor or an independent contractor; contracts are a fact of business. Contracts serve as legally valid agreements that protect your interests.
The attorneys at The Orlando Law Group can help any business looking to create or review their contracts to make sure they are binding and cover all of the important topics needed for business contracts.
What Makes A Contract Great?
Generally, to be legally valid, most contracts must contain two elements:
- All parties must agree about an offer made by one party and accepted by the other.
- Something of value must be exchanged for something else of value. This can include goods, cash, services, or a pledge to exchange these items.
The point when two parties agree can be a little fuzzy.
For example, many businesses will put a standard contract template before an independent contractor and expect it to be signed without any discussion. At that point – and the law is clear on this – a legal contract exists only when one party makes an offer and the other accepts all terms of that offer.
In this example, the contractor is still free to rebut any of the points in the contract and make a counteroffer, until an agreement has been reached.
Offers are rarely accepted immediately and further discussions or amendments may be required. Unless the offer has a deadline for acceptance, it can remain open.
In addition to ensuring both parties agree on the terms of an offer, the second element that ensures a contract is legally valid is that both parties exchange something of value. This is important since it differentiates a contract from being a one-sided statement or even a gift.
“Something of value” can be as simple as a promise to perform certain services by one party while the other party agrees to pay a fee for the work performed.
Most business transactions are based on this exchange of promises. However, the act of doing the work can also satisfy the exchange of value rule. For example, if you contract with a vendor to provide you X and Y, but you decide you need to add Z to the final deliverable, the vendor can create a binding contract by actually doing Z – something which you can’t object to if you change your mind.
Include an expiration date on any offer and counteroffer
It’s good practice to include an expiration date for any offer or counteroffer during contract negotiations to ensure you have time to maneuver should you wish to change the terms or revoke the offer before a certain date.
Offers that are subject to an expiration date – known as option agreements – are typically price-driven or allow the buyer to mull the decision without fear of losing out to a competing buyer.
It’s important to understand that a seller can place a fee on option agreements. For example, if you decide to give a buyer 30 days to think over a purchase, you can charge for that. This typically occurs when the product or service is of high value or when the seller pledges not to sell that product to another customer during that 30-day option period.
Likewise, a seller can’t revoke the offer until that 30-day period ends.
The Keys to Every Good Contract!
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 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.
- 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 party’s 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.
- 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.
Have You Developed a Form Contract?
A lot of times, people use form contracts, which have the language and terms already set. Parties usually do not negotiate when using form contracts.
Landlord/tenant agreements are a common example of when form contracts are used.
You can also use a form contract as a model when drafting a more customized contract. Pay attention to the details, define any words that could be misconstrued, or any terms that are ambiguous, be specific.
When drafting a contract, clarifying the terms and duties should be the goal. Make sure to carefully review the terms of the contract so you are aware of your responsibilities.
Some key items to come up with your form of contract are:
- Get sample contracts of what other people do in the industry, you don’t need to re-invent a contract.
- Make sure you have an experienced business lawyer doing the drafting, one that already has good forms to start with.
- Make sure you make it look like a standard form pre-printed contract with typeface and font size.
- Don’t make it so ridiculously long that the other side will throw up their hands when they see it.
- Make sure you have clearly spelled out pricing, when payment is due, and what penalties or interest are owed if payment isn’t made.
- Try to limit warranties when possible for products and services.
- Include limitations on your liability if the product or service doesn’t meet expectations.
- Include a “force majeure” clause relieving you from breach if unforeseen events occur.
- Include a clause on how disputes will be resolved. Our preference is for confidential binding arbitration in front of one arbitrator.
While the form contract is standard, it does not prevent customization when needed. Every contract can be tailored to be more favorable to one side or the other.
You can start with your form of contract, and your clients can agree and sign or request changes be made. Working with a lawyer who is experienced with the right wording to use, can save you a lot of time and money in the long run.
Other steps to finalizing a contract
In some cases, like when you agree to the terms and conditions, signing a contract is fairly easy. After all, you can’t negotiate your service agreement with Netflix.
Here are some other issues to watch for when developing and negotiating contracts.
- While negotiating contracts, make certain you are comfortable with your proposed duties and obligations. Make your intentions, requirements and expectations of the other party clear at the beginning of negotiations. And, as a safeguard, remember to negotiate for a remedy within the contract if there is a breach by either of the parties.
- Many parties use legalese, legal words and language, when drafting contracts. This can make the terms and obligations of the contract confusing. Use regular language when possible, to ensure that both parties understand what the contract says and means.
- Contract negotiations, especially important financial contracts, can be grueling. An attorney can help you with negotiations, making sure that your needs and requirements will be met. Also, a lawyer can help you with the initial and final draft and contract review, and explain to you your duties under the contract. An attorney is there to look out for your best interests throughout the entire contract process.
Don’t forget the most critical step!
Before you sign any contract, read it. Make sure you know what your stated obligations are under the contract. If you are uncertain as to your duties, and you sign the contract, you may be liable for breaching the contract.
It’s a good idea to have a lawyer review the contract terms to ensure that your needs will be met and that you will not obligate yourself unexpectedly.
Yes, even those terms and agreements need to be read. We recently experienced one of those types of contracts that had an obligation to pay a monthly fee for 12 months in the terms and conditions, several pages down.
While that could be considered a deceptive business practice, if you read the contract, you would have seen that clause.
The attorneys at The Orlando Law Group can help your business with any contract needs as we understand business and represent clients in business law and more in Orlando, Waterford Lakes, Altamonte Springs, Winter Garden, Lake Nona, St. Cloud, Kissimmee, and throughout Central Florida.
If you have questions about anything discussed in this article or other legal matters, give our office a call at 407-512-4394 or fill out our online contact form to schedule a consultation to discuss your case. We have an office conveniently located at 12301 Lake Underhill Rd, Suite 213, Orlando, FL 32828, as well as offices in Seminole, Osceola and West Orange counties to assist you.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.
Last Updated on March 12, 2025 by The Orlando Law Group
