Business contracts are essential in starting and maintaining cohesive, well-functioning professional relationships. A carefully prepared agreement outlines each party’s rights, duties, and responsibilities. It can also prevent or resolve potential disputes. Without business contracts, ensuring everyone fulfills their obligations is challenging.
At Arenson Law Group, PC, our Cedar Rapids business law attorneys know how to prepare legally binding contracts to suit our client’s needs. We can help you with negotiations and incorporate the terms and conditions necessary to protect your interests. Call us at (319) 363-8199 for a confidential consultation with one of our dedicated Cedar Rapids contract preparation attorneys to learn more.
Common Types of Business Contracts
A business contract is a legal agreement between two or more parties acknowledging their rights and obligations. In any professional relationship, a contract is vital to protect each party involved.
The most common types of business contracts include:
- Independent contractor agreements – An independent contractor agreement details the terms and conditions of an individual completing a contracted service or job for a company.
- Bill of sale – A bill of sale is a legal document conveying a title to a property and showing proof of an agreed-upon transaction.
- Noncompete agreements – In a noncompete agreement, an employee agrees not to take a job with a competitor after leaving their current employer.
- Partnership agreements – A partnership agreement establishes a relationship between business owners and outlines each partner’s obligations, financial responsibilities, and roles within the company.
- Security agreements – A security agreement is a contract that secures a loan by promising assets or property as collateral if the loan goes into default.
- Employment contracts – An employment contract explains the terms of an employer-employee relationship, including salary, benefits, and other employment-related matters.
- Property and equipment leases – Lease agreements for property and equipment outline the terms and conditions of the lease, including maintenance agreements, deposits, and rental payments for the use of property, a building, or equipment.
- Nondisclosure agreements – A nondisclosure agreement prohibits parties from disclosing confidential or proprietary business information to outsiders.
- Indemnity agreements – An indemnity agreement establishes that one party can’t be liable for a specific occurrence or situation. This type of agreement is intended to prevent potential lawsuits.
- Purchase orders – Using a purchase order, a business owner agrees to purchase an item at a predetermined price legally.
Components of a Legally Enforceable Business Contract
Anyone can draft a contract using a template or a free service online. However, choosing this option isn’t a good idea. Templates don’t account for the unique circumstances of a legal agreement between the parties. You should always hire an attorney to draft and review the final terms and ensure every aspect of the contract is valid and enforceable under state law.
Contracts typically follow a specific format with various components. They must include clear language that no one can misinterpret or misunderstand. They must also contain the signatures of each party to the contract showing they agree to the terms and conditions.
All business contracts must include specific components:
- An offer
- An acceptance of the offer
- Consideration, which is an exchange of money or something of value
- Identification of each party involved in the contract who has the legal capacity to enter into and understand the agreement
- Subject matter that is not illegal
- Mutual agreement between the parties
- Mutual understanding of each party’s duties and rights
Business contracts can also contain various terms, conditions, provisions, and exclusions, such as:
- Indemnification
- Force majeure
- Severability
- Assignment
- Choice of law and forum selection
- Confidentiality
- Liquidated damages clause
- Warranties
- Arbitration clause
- Time is of the essence clause
These conditions and terms relate to duties each party must perform, events that trigger conditional consequences, or activities the parties must avoid to risk breaching the contract.
How to Prepare a Business Contract
A written contract lays the groundwork for any relationship between two or multiple parties. The agreement requires well-thought-out terms, conditions, and exclusions to cover every aspect of the business relationship.
The work isn’t over once you sign on the dotted line. You should have your lawyer review it regularly to confirm it outlines up-to-date rights and responsibilities of each party. Modifications and amendments are often necessary after specific circumstances and events.
Preparing a contract involves multiple steps, including:
- Draft the document – You must start by determining the type of contract you need and the issues you must address. Consider the different options and how you would like to proceed with the agreement to suit your needs and protect yourself if disputes arise.
- Negotiate the terms – Once you decide which contract works best for your situation and the elements you want to incorporate, you can begin negotiations. You must negotiate the terms, exclusions, provisions, and conditions to include in the contract. The outcome should be reasonable and fair to everyone involved.
- Execute and implement – Everyone must sign when you reach a mutual agreement with the other parties to the contract. One of the party’s lawyers will likely keep the original contract and provide a copy to each party. It is crucial to keep the agreement readily available to refer to it later if necessary.
Benefits of Hiring a Contract Preparation Lawyer
Hiring a lawyer to help prepare your contract is beneficial for many reasons, including:
- Ensuring the terms and conditions in the final draft are what you intended to include
- Preventing a breach of contract and other legal disputes
- Identifying your rights or protections and using them to take legal action against a breaching party or defending against a lawsuit
- Acquiring an understanding of the obligations and duties of all parties
- Avoiding an unconscionable, illegal, or voidable contract
- Incorporating additional terms and conditions left out of the agreement that can benefit you during the professional relationship
Get Started on Your Contract Preparation Today
Arenson Law Group, PC has over three decades of legal experience representing clients in contract law matters. We understand the complexities of drafting contracts and how to protect our client’s rights.
Call us at (319) 363-8199 for a confidential consultation with one of our Cedar Rapids contract preparation attorneys if you need to prepare a business contract. You shouldn’t take on this difficult task alone.
