Commercial Contracts and Agreements
A commercial contract is a legally binding agreement between two or more parties which obligates them to do or not do certain things. Whether by a formal written agreement or through an informal understanding, most businesses use commercial contracts to ensure that the terms of their business deals are clearly described and understood.
In general, a contract is a legally binding agreement. It serves not only to bind the parties but also provides recourse if one party does not hold up its end of the bargain and the other party has resulting damages.
Basic requirements for an enforceable contact (whether written or oral) include:
Consideration. Each party must promise or provide something of value to the other. Without this exchange, there is no contract.
Offer and acceptance. A clear or definite offer to contract must occur ("Do you want to buy this?") and an unqualified acceptance ("Yes!").
Legal purpose. The agreement must be for a purpose that does not violate the law. For example, in many states, certain contracts requiring payment of high interest rates may violate usury laws.
Capable parties. To be "capable" of making a contract, the parties must understand what they are doing. The general presumption is that minors and people with certain mental disabilities are not competent to enter contracts, for that reason, contracts executed by them are generally not enforceable.
Mutual assent. This must be a "meeting of the minds." The parties must intend to be bound and agree on the essential terms.
Note – these are only general rules, federal and state laws may impose many more requirements on particular types of contracts. For example, often certain consumer contracts must be in writing and meet additional requirements.
The Form of a Written Contract
Typically a written contract will include some or all of the following:
- introductory material (sometimes known as "recitals" or "whereas provisions")
- definitions of key terms
- a statement of the purpose or purposes for the agreement
- a recital of the obligations each party its agreeing to undertake (and conditions that may trigger certain obligations)
- assurances as to various aspects of agreement (sometimes phrased as warranties, representations, or covenants)
- boilerplate provisions
- a place to sign, and
- exhibits or attachments that may help describe the scope and nature of any agreement.
The process of entering into a Contract typically involves three steps or moves.
Phase 1: Contemplating the deal. Each side assesses the other and contemplates a prospective arrangement and its risks ("Can I work with her?") and attempt to predict the future ("Will I regret buying that car?").
Phase 2: Reaching an agreement. Here the parties negotiate and agree on the terms, usually this results in a formal written agreement or some other documented evidence of the deal (such as an email confirmation or purchase order), but sometimes oral agreements are binding.
Phase 3: Performance and enforcement. Once the contract is executed, the parties are legally required to perform their mutual obligations. If one party fails to do so, the other can sue to enforce the deal or seek damages.
Many businesses face the added challenge of trying to negotiate and navigate business contracts in a fast-paced business and regulatory environment. If you do not have in-house counsel working to ensure that your interests are protected, the result can often be difficult and frustrating. An experienced commercial attorney can add value in working with your business to help identify and solve potential problem areas before they arise.
From the beginning, our commercial attorneys will assist in making contracts clear and understandable while making sure that your business objectives are met. In reviewing the contract, our attorneys can explain any potential risks and liabilities, as well as any concepts or terms that are unfamiliar to you. Our attorneys will also consult with you as to whether you are able to meet all contractual commitments, and work with you to avoid breaches as well as deal with any breaches that might occur.
Here are examples of the kinds of business contracts that we can assist you with:
- Production and logistics agreements
- Distribution agreements
- Equipment purchase and lease agreements
- External manufacturing agreements
- Warehouse agreements
- Transportation service agreements
- Consulting contracts and other outside contractor agreements
- Marketing services agreements
- Public relations agreements
- Marketing research agreements
- Letters of intent
- Software licensing agreements
- Confidentiality agreements
- Construction Contracts
- Any other contracts involving the purchase of products and services
- Any other contracts involving the sale of products and services