What is a contract?

A contract is a legally binding agreement between two or more parties. A contract can be oral or written and is only required to be in writing in a few circumstances.

Why its important to get your contracts in writing.

The purpose of getting a contract in writing is to help avoid or limit the expense litigation. A well drafted contract addresses all of the important issues between the parties. Leaving little room for argument as to what the parties intended. Memories tend to fade with time and when times get tough parties will argue over issues that are not fully addressed in writing.

What happens if someone fails or refuses to perform on our contract

If someone fails or refuses to perform on a contract, only a court can force them to perform. In some cases, courts will not order a party to perform and the non-breaching party can be only seek money damages for the breach.

What is a breach of contract

A breach of contract occurs when a party to a contract fails or refuses to perform as required by the contract.

What are some common reasons why a contract is not binding?

Contracts may not be binding upon a party for a number of reasons. In order for a contract to be binding, the parties to the contract must be legally competent to enter into a contract. Minors and mentally incompetent adults do not have the capacity to enter into a contract. Contracts for the sale of land must be in writing. Contracts for the debts of others. Contracts that cannot be completed in one year.

Who is liable when the contract is breached?

Typically, only parties to the contract are liable for any breach of the contract. To adequately protect yourself, it is important that you seek personal guarantees whenever contracting with corporations or limited liability companies.

How to protect your interests when entering into a contract

The best way to protect yourself when entering into a contract is to make sure you know who you are contracting with. If the other party breaches the contract, will they have the ability to adequately compensate you if they fail to perform. If not, evaluate whether the benefit of doing business with that party is worth the risk. Or, evaluate how you can best protect your interests, such as paying after the work is done, adding penalties, getting personal guarantees, etc.

How to draft a contract - what do you need to include?

Whenever you enter into a contract, it is important to make sure that all important issues are addressed, that the duties and responsibilities of the parties are clearly spelled out in adequate detail, that the parties to the contract are properly identified, that the consideration (compensation) is adequately stated, that default provisions are properly considered and addressed.

Avoid a lawsuit - Don't overlook the details!

Litigation is expensive. Legal fees and court costs grow very rapidly and typically exceed tens of thousands of dollars. Lawsuits over contracts typically result from failing to adequately address all important issues between the parties. While it is impossible to include all details and to address all possible scenarios, it is necessary to consider those matters that are most important and the scenarios that are most likely to occur. Time should be spent considering all duties and responsibilities of the parties, how and when compensation is paid, what type of compensation is being exchanged, time frames, default provisions, etc... What is important to one party may not be important to another. If you want to avoid a lawsuit make sure that both parties adequately consider and address all issues that are important to them.

Protect your business, get your agreements in writing

When a dispute involves an oral contract, the outcome is often times much more speculative. Often times the outcome boils down to which party is more believable. Not good for someone with a nervous personality. And, failure to get it in writing often times leads to disputes over a greater number of issues, which usually increases the costs of litigation. Certain types of contracts, such as non-compete and non-solicitation agreements must be in writing to be enforced.

What is an indemnification agreement?

An indemnification agreement is an agreement between parties to a contract that one party will reimburse or pay for any cost and/or expenses associated with claims or lawsuits brought against the other party.

 

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