What Is the Function of a Business Contract?

A business contract outlines the legal agreements between two parties.

A business contract is a legal agreement between the business in question and a contractor, employee or another business. The business contract is developed to outline the agreed terms and conditions of the agreement, whether it is product development collaboration or hiring services from a contractor or company. The function of the business contract is to protect the interests of both parties involved.

Outline an Agreement

The business contract outlines the agreement between the two parties, whether it is two businesses or a business and a contractor. The purpose of the agreement can be collaborative reasons or hiring one business to do a service or provide a product for the hiring company. The business contract should define the scope or purpose of the agreement, so the reader understands why the two parties have established this agreement.

Establish the Terms and Conditions

The terms and conditions of the business contract must also be explained in the contract. The terms and conditions are the guidelines or rules established by the hiring company that the contractor must follow during the duration of the contract. This can include goals that must be met, issues that must be resolved and a budget that must be upheld during the process. The terms and conditions must be beneficial to both the company and the hired contractor.

Explain the Consequences of Breach

Any contract can be broken or breached if a company or contractor does not respect or uphold the outlined terms and conditions. If the contractor or company feels that the other party does not perform as expected, the contract can be broken. If the contract is breached rather than broken through legal procedures, the party that has been breached can take legal action if money was lost or terms and conditions were not upheld. The consequences of breaching a contract are serious and can potentially be costly and affect the reputation of the contractor or company depending on the given situation.

Legalize the Contract

While a contract can outline the consequences of breaching the contract and list procedures for completing the job or tasks, none of it can be used in a legal sense until the contract has been signed and dated by both parties. The contractor should not sign the business contract until he understands all of the sections and consequences of entering the business agreement.

References

• Small Business Notes: Sample Partnership Agreement
• Public Legal Forms: Partnership Agreement
• "Senior Magazine"; Contract Elements -- Contract Formation; Fran Przyblewski