When you run a small business, no matter the type, you’ll likely have lots of different relationships that include some form of obligation or commitment. This is where contracts come in. Although you’ll often see the words contract and agreement used as if they’re the same thing, there is a slight difference between the two:
Contract: An agreement between parties that creates legally enforceable obligations.
Agreement: A mutual understanding between parties in terms of their rights and responsibilities.
We want to focus more specifically on contracts. Although a verbal contract is still considered a legal contract, and you can have a combination of written and verbal contracts, it’s much better to have a written contract and to make it as specific as possible, especially if it’s a long-term contract. Having a proper contract in place protects everyone involved.
Although there’s no specific format to a contract, there are six key things you need to make sure your contract is valid and can be enforced by a court. You can still have a contract without all these things; it just means that if any of them are missing, you can’t ask a court to enforce the contract.
Offer, Acceptance, and Mutual Consent
Remember, if your contract doesn’t include the items above, then it can’t be enforced in court.
What are some of the details contracts usually include?
It can be useful to look up different types of contracts online, so you can get a good sense of what different contracts look like and what they include. You may also need to get legal advice to draw up a contract to make sure you’ve covered all the necessary details.