Do you know why contracts are necessary in your business?
Do you understand the contracts you sign?
Do you have standard contracts for your clients?
Do you know what a standard contract is?
This short video gives an overview of contracts.
Understanding Contracts
Understanding the contracts you sign is essential to your business and every transaction you make.
If you don’t know what should be in the contract or why a clause is in the contract you could be signing your business away and losing significant amounts of money.
A contract is a checklist that allows all parties in a transaction to know who is going to do what, where, how and when.
A contract can be a simple as a one page document or as complex as necessary. It depends on how much detail needs to be agreed to.
A good contract allows all parties to know their obligations in the transactions and that of the other party. It should also provide remedies if parties to the contract do not meet their obligations.
Each time you undertake a transaction in your business you enter into a contract. Sometimes it is a verbal contract and sometimes it may consist of a document of several hundred pages. Nevertheless, they are all contracts that contain the 5 same elements.
Offer
Acceptance
Consideration
Intention to be legally bound
Capacity
Without these elements a contract does not exist.
By using written contracts you can avoid confusion of the parties as to who is to do what, where, when and how. The contract should act as a rule book to ensure clarity.
Your contracts should be ‘living’ rule books that reflect the bargain that has been reached by the parties. It should be signed by the authorised persons and customised to your specific situation. Your contracts should spell out the principles of a workable transaction.