In the modern business era, contracts are a significant detail that should not be overlooked. Contracts ensure that everyone involved is on the same page about their goals and weaves this into a legal document that outlines what can and cannot be done to achieve these goals.
Without clearly defined goals and responsibilities in the contract, it could create problems for one or more of the parties involved. If you go to any lawyer, they will always advise you to ensure your contract includes adequate details to avoid conflicts down the road.
The following is an overview of contractual law decisions to help guide you through what elements might be necessary for your next business transaction.
The Contractual Law Overview
Contract law is a body of rules that governs the agreement between parties in a transaction. These transactions usually pertain to the sale or exchange of goods and services, including tenancy agreements.
For these transactions to be successful, both parties must understand their rights and responsibilities concerning any transaction.
If both parties involved in the transaction have been involved with a good faith business transaction, then they would be subject to abide by this agreement.
Keep in mind that the International Sale of Goods (CISG) will only bind the recipient if it outlines their needs, provides sufficient information about the good, and accepts the terms of sale.
The CISG definition of good faith is when both parties intend to enter into a transaction and not try to get out of it. This agreement does not apply to situations where one party buys products specifically for resale purposes.
Elements Necessary for Contractual Law Obligations
Although much of what has been discussed is not a common element considered in contractual law, certain essentials must be included. These include:
icon-angle-right Verbal vs. Written
It is always advised to have all agreements in writing since it could determine who was at fault if any problems arise.
With documentation available for both sides, they will show proof one way or another of what happened during negotiations. This allows each party to follow through with anything promised or discussed during negotiations.
icon-angle-right The Offer
When creating contracts, the most crucial element to look at is the wording of the offer. If anything within this section can be considered vague, then the contract might not hold any legal action in place.
This means that it could become subject to interpretation, and when this happens, either party has grounds for a lawsuit. It is also advised that any changes made regarding an offer should be brought to attention before acceptance occurs.
This ensures that problems will arise during discussions instead of when both parties have agreed on something that could ultimately become false promises.
icon-angle-right Definition of Goods and Services Provided
Since the beginning of time, there has been something called goods and services used in terms of business. Since it is assumed that both parties will understand what these items are, then all relevant terms should be agreed upon before negotiations.
If this fails to occur, then it could lead to much confusion when this agreement becomes breached because either party might assume different things. This can often create problems down the road if this happens since it could ultimately impact satisfaction by both parties after these transactions have taken place.
icon-angle-right Exclusion of Liability & Warranties
Courts do not accept that individuals can exempt themselves from any liability if their actions violate the terms set forth by the contract. This means, even if it’s agreed upon, there must be proof within the contract that debunks this claim.
Along with warranty clauses, responsibility clauses also state what happens when there is a failure to provide goods or services because of negligence. If anything like this occurs, then damages will need to be paid, so you want to ensure everything is appropriately documented before signing any forms of documentation.
Details That Should Not Be Found in Contractual Law
As much as you need to include all elements needed for your transaction, certain elements should stay out of any contractual agreement. These include:
icon-angle-right Limit of Liability Clause
When hiring lawyers or accountants, you would be advised to include a clause that limits your liability for their actions.
This means the individual will only be held liable for damages if they had acted with malice or misconduct. This does not mean that the professional cannot be sued, but rather it limits how much you will be liable to pay out in damages.
Everything is subject to negotiations between parties, and ultimately the court decides on the outcome of any damages paid out after a breach of contract.
icon-angle-right Breach Penalty Clauses
If you want specific punishments dealt out in case of a breach, they should be defined in detail within the terms of sale.
People often ask for several damages to be paid out due to a breach, but this is not enforceable. This means that the court has the final word on what will happen if there is a breach of contract.
icon-angle-right Stipulations Regarding Lawsuit
If you use a state’s laws to govern your agreement, specific stipulations are related to a legal suit that is usually not enforced. These include but are not limited to:
- Bringing suit in another location other than where the contract was signed,
- Filing suit before the time required by law, or
- Suing for an amount less than what is stated within the agreement.
icon-angle-right Completion Dates
Completion dates are also not considered valid since they can become unobtainable due to many variables that will occur down the road. These completion dates might have been agreed upon prior, but unforeseen problems might arise, which could delay obtaining this date.
Conclusion
These are just some aspects you should know about contractual law before engaging in your next business transaction.
While it might not have been something you thought about before, now you are more equipped with the knowledge of what should and should not go into your subsequent agreement. Always remember to consult with lawyers or other professionals to ensure all elements necessary are included within any terms of sale.