How to Create a Business Contract Easily with This Example
Every time you do business, you should know exactly what you are getting and how much it will cost.
A business contract safeguards your interests and those of the other party, meaning that your business stays safe and problem-free.
We know that writing a contract or creating legal documents is difficult, so DoNotPay has created a simple legal contract example to help you avoid the pitfalls and keep your business running smoothly.
What Is a Business Contract?
A business contract is a legally binding agreement between two parties. The parties could be:
- Two companies
- A company and an individual
- Two individuals
Such an agreement usually sets forth that one party will deliver a product or service by a certain date. In return, they’ll receive remuneration in the form of money, goods, or services of equal value.
To make a business contract valid, you need to include the following elements:
- Offer
- Acceptance
- Consideration
- Mutual consent
- Competence
- Legal purpose
Offer
The contract contains an offer for one of the parties to provide goods or services to the other.
Acceptance
Under the terms of the contract, the other party agrees to the offer, as long as all the conditions of the contract are fulfilled.
Consideration
The party accepting the offer agrees to pay a consideration for the goods or services offered. The consideration could be:
- Money
- Goods or services of a certain value in return
- Other intangible remuneration, such as goodwill, advertising, or similar
Mutual Consent
Both parties demonstrate that they agree to the terms of the contract and that they are not under duress or pressure to do so.
Competence
Both parties are competent to sign the contract, meaning that they are:
- Old enough—normally this means 18 or over
- Capable of grasping the terms of the contract
- Entitled to sign on behalf of the business(es) they represent
Legal Purpose
The contract must be legally permissible, meaning that a contract is not valid if it involves doing something illegal.
What Needs To Be in a Business Contract?
The following elements need to be in your business contract:
| Contract Element |
Explanation |
| Date of contract | You must note the commencement date of the contract—this will normally be the signing date |
| Names of parties | You and the other party should note your full names, addresses, and contact details. If the contract is between two companies, their names and addresses should be stated, and you should identify yourself as legally representing your organization |
| Term of contract | The length of the agreement needs to be fixed by including either a contract duration or its completion date |
| Services or products to be provided | You should describe exactly what is to be provided—the more detail, the better. Contracts often end up in court as a result of insufficient detail in the description of what is to be delivered. Your list of goods or services to be provided should be complete and unambiguous |
| Payment details | You and the other party should agree on:
|
| Breach clauses | Any actions that would constitute a breach of the contract need to be written down. These could include:
Your contract should also include what to do in the event of a material breach |
| Governing law | You should note the state jurisdiction the contract falls under |
If all these elements are in place, your business contract should guarantee that both parties get what they want from the business relationship. Bear in mind that the contract has to be signed by both parties and notarized before it becomes legally binding.
What Could Trigger the Termination of a Business Contract?
Once your contract is signed, your business with the other party should progress smoothly. If this is not the case, though, you need an escape route to get out of the contract.
There are five situations in which a business contract can be terminated:
- Impossibility of performance
- Breach
- Prior agreement
- Rescission
- Completion
Impossibility of Performance
If external circumstances mean that one of the parties is unable to deliver what they promised, the other party has the right to terminate the contract, citing the impossibility of performance. Typical causes of an impossibility of performance could be:
- Death or illness of the delivering party
- Force majeure
- Unexpected changes in the law that make performance illegal
Breach
Any intentional breach of the contract can give you the right to terminate it. Bear in mind that you may have to provide proof of the intent to breach. If no intent is provable, you may be the party in breach.
Prior Agreement
Both parties can agree to terminate the contract by mutual consent. This must be noted in writing, though.
Rescission
Rescission occurs when one of the parties misrepresents themselves, commits fraud, or acts illegally within the boundaries of the contract. If, as an example, you hire an external IT engineer to fix a problem and the engineer misrepresents their qualifications with the result that your problem remains unsolved, you can terminate the contract.
Completion
The contract is terminated automatically when all of its obligations are fulfilled. It is a good idea to keep records of the completion in case the other party tries to dispute the results at a later date.
How Can DoNotPay Help Me With a Business Contract?
We understand the difficulties of creating watertight legal documents, and DoNotPay can help you with a range of ready-made, customizable contract templates to cover many situations.
You can create a simple business contract using the guidelines and examples above, but if you are looking for something specific, here’s what you can do to :
- Go to DoNotPay in your web browser
- Search for the document you need
- Give us the details you want included
- Wait while we create your document
What Other Legal Docs Does DoNotPay Have?
We are expanding our range of documents all the time, and here are a few examples of what we can offer you once you :
| Business | Personal | Property |
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