5 Things To Consider When Drawing Up A Legal Contract In Business
The idea of putting up a business is easy. It can be formulated in our brains, and we can think of any idea at which we are skilled. A business may be born out of creative ideas we have in our brains or even from the skills that we possess. The tedious part is fixing up the legalities that come along with putting up a business.
Starting up a business can entail so many steps and documents. People may get confused with the various requirements that are needed before acquiring permits, stall, and even the equipment necessary to run and operate.
As an aspiring business owner, there are certain things to consider and remember when drawing up a legal contract in the business. You can easily sort out a contract creation, but first you make sure that you have sorted out the legal side first.
#1 Include all the details
This may seem vague at first but when we say include all the details, it means literally from the business name, to the owners and partners if there are any and to the location; everything is necessary in the contract.
The contract has to be carefully outlined according to how it is handled. In addition to the names of the owners or parties involved and the business name, include what their roles will be when the business is approved and has begun operations. Aside from that, it should also mention what the nature of the business is and to what industry it belongs.
Some businesses may need to apply for a loan in some financial institutions; there are times that they require a copy of the business contract. This is why it is necessary to mention the reasons behind the application, the manner on how will it be utilized, and if there are still other pending loans incurred by the company.
#2 Mind the language
When it comes to drafting a contract, language is one of the vital elements that both parties should remember. The language to be used should be one that is easily understood by both parties, simple, uncomplicated, and most likely to be direct and to the point. The rationale is to avoid misunderstandings and minor conflicts.
When you consult a lawyer to draft the contract, please ask them to use simple language that both of the parties will understand. If there are terms too complicated for you, do not hesitate to ask the lawyer.
Some draft contracts in various ways. Others segment the different categories and number them according to which segment they would cover. If a number of the provisions pertain to rent, then it will be under rent. Segmentation makes it easier for the parties to read and understand every part of the contract.
There are various computer softwares that could help in creating or drafting a contract. This makes the job easier than doing it by yourself. Not only does it save time, but financial resources as well.
#3 Legal capacity
Before a contract is validated, there is a primary requisite that must be reviewed. The two parties must be able to establish the fact that their consent is voluntary and that they both have the legal capacity to enter a contract.
How can they prove their legal capacity?
- Must be of legal age
- Must be of sound mind—if one of them is under the influence or suffering from a mental illness in which they cannot give their consent, they will not be allowed to enter a contract.
- Consent must be voluntary—if they were forced to enter the contract, then it will not be a valid contract.
#4 Explain payment details
In entering a contract in business, it is vital to specify and know how payments are to be made. Since there will be matters that would require payment such as rent (if the business is leasing an office or stall) and utilities (such as electric and water bills), salaries of the workers you have (if there are any), it is best if this is clearly mentioned in the contract.
- For the workers, it is best to determine if it will be hourly rate or a fixed rate (either daily, weekly, or monthly).
Another detail that should be mentioned here is about the mode of payment: cash, check, or even online payments.
#5 Termination of the contract
Just like most things, contracts don’t last a lifetime. Whether it’s a business contract or a home foreclosure contract, it’s always important to know when it runs out.
The contract must also show provisions on how to terminate it, since there are times that one or more of the contracting parties conducted a breach.
It may be about the payment; there are instances that they might have missed a certain deadline or there have been violations that both of them cannot tolerate any longer.
Termination may be mutual, or only one of the parties have the intention of terminating the contract. Either way, it is important to have specific provisions that addresses the termination of the contract.