There are all sorts of practical skills to learn when you start a new business. One crucial capability is how to write a contract. A contract is a legally binding document that protects you and your client, especially if there is a disagreement. A comprehensive contract will usually stop issues arising before they start and ensure that you get paid in full and on time. This guide can help you understand the basics of contract writing
What is a Contract?
A contract is a legally binding agreement between two parties – your company and your client. They can be individuals or businesses. A contract can agree to purchase goods or services, borrow money, provide a rental agreement or franchise/brand partnership agreements.
How to Write a Contract
First of all you should always seek legal advice regarding contractual agreements in business. But you need to know where to start before bringing your legal advisors who come with fees attached. Don’t be daunted by the idea of small print. In basic terms a contract simply sets out the contractual agreement between two parties. If you undertake a job for a client, the contract will specify exactly what you will provide, and what your expectations are of your client, like terms of payment. A contract protects you if there is a payment dispute and proves that the client has agreed to pay for the work that you do for them. Your business could improve cash flow function and improve payment security by using contracts to make sure you get paid on time. A contract does not have to be complicated, we will break down the elements here to get you started.
What Does a Contract Consist of?
A contract usually consists of four key principal elements.
- An Offer – This is what the contract is about and includes key terms of what is being offered/discussed.
- An Acceptance – This allows your client/party to agree to your terms and thus accept the contract terms.
- A Legal Intention to Create a Legal Relationship – Acceptance of the terms should then highlight what this would mean in terms of both parties forming a relationship to deliver on the original offer.
- Legal Consideration – This is the financial dynamics of the offer/acceptance and relationship processes and is followed by signatures from all parties to make the agreement formal.
The “Small Print” Explained
Within the contract you will need to specify your expectations in more detail.
Think about all the elements of the work you are due to undertake and then specify:
- The exact specification of the work to be completed, in full detail without vagueness.
- Deadlines and Milestones for Delivery
- Revision or Edit Rules
- Contact Information for All Parties
- Early Termination Processes
- Intellectual Rights Guidance
- Payment Terms / Deadlines
- Shipping/Distribution Terms/Deadlines
Include a section where both you and your client can sign and date the contract, once it has been agreed. Make sure you each have a copy for your records. If you have created a template contract which you can now reuse for future jobs, make sure that you have updated all of the details relevant to the current job. A mistake in your contract could cause problems later. Once you have specified the job, schedules, and payment terms, it is advisable to meet with a solicitor to help make sure your contract is legally correct and protects your business.
At Prestige Business Management we can help Your Business
At Prestige Business Management we can help you understand and manage your business development and accounting. Find out what we can do for you. Call us today on 0203 773 2927.