Business Contract Requirements
There are basic requirements associated with a business contract. In the absence of these requirements, a business contract of any type will not be binding and will not be legally enforceable. It is imperative that all of the essential requirements of such an agreement be in place and fully satisfied. Consequently, any business contract necessarily needs to be drafted with care to ensure that it serves the needs and business interests of the parties to the contract.
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Consideration
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The most basic requirement of any contract, including a business contract, is what legally is known as "consideration." A contract cannot legally exist in the absence of consideration. Consideration in a business contract normally consists of the mutual promises that are made by the parties to the contract. Each party must make a binding promise--or convey something else of value like money--to the other party in order to the agreement between them to be a true and enforceable contract.
Meeting the Minds
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Another of the essential business contract requirements is what is known as "meeting of the minds." By this it is meant that the parties have to come to a specific agreement as to the terms and conditions of the business agreement. Because a business agreement normally will be in writing, the parties ultimately signify their understanding and agreement to the provisions of the contract by signing the document. However, if it clearly can be demonstrated that a provision of the contract is open to two diverse and yet legitimate interpretations, and each party has taken a different position in regard to those interpretations, there is no meeting of the minds and no valid business agreement.
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Time Frame
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Another requirement of a business contract is the time frame in which the terms of the contract are to be fulfilled. A contract must specifically delineate the time period in which what is known as performance under the agreement will occur. For example, if a business contract is entered into in which a manufacturer provides a wholesaler with a certain product, the time frame in which the product will be provided (and how and when the buyer will pay for that product) needs to be specifically set forth within the agreement itself.
Significance
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The primary significance of establishing the business contract requirements is that the parties then must undertake what they promise to do in that agreement. If a party does not perform as promised, the other party to the business contract has the ability to undertake legal action to enforce the provisions of the contract or to obtain monetary damages. Unless the party being sued can demonstrate that the contract was somehow defective--no consideration, no meeting of the minds--that individual will face a judgment requiring him to satisfy the contract or pay damages.
Expert Insight
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Some business owners or managers make the decision to draft business contracts on their own. Most of these professionals, while skilled at what they do otherwise, really do not have the experience and training necessary to ensure that all of the business contract requirements appropriately are satisfied. Therefore, because business agreements are so important, because a great deal can be at stake under the terms of a contract, it is prudent to obtain qualified legal assistance in the drafting of a business agreement.
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