Austin, Texas continues to thrive as one of the top American tech hubs with a rapidly growing business climate. With so many new startups, company expansions, business transactions, and more taking place, the need for comprehensive and well-written contracts are rising.
A contract can make or break a deal, meaning every business must ensure that they are signing a legitimate contract that will benefit their interests, as well as the interests of other parties involved.
Moreover, businesses majorly depend on contracts to lay a foundation for their professional relations with other businesses, clients, and employees. A contract ensures that all the parties involved supply or deliver the agreed-upon procedures, services, and products that govern those relationships.
For a contract to be successful, it should possess certain elements. This post will explore what a contract is, the types of contracts, the importance of a valid contract, and the elements a contract must have.
What Is a Contract?
Any legally binding agreement between two or more entities that creates an obligation for everyone involved to perform or not perform a particular duty as specified is considered a contract. It is a foundational element and an agreement that enables parties (businesses and individuals) to collaborate toward their specific needs and goals.
In general, contracts can either be spoken or written, but in order to be enforceable, the contract must create an obligation for each participant to perform some duty. Certain contracts do need to be in writing, such as real estate sales and leases.
4 Main Types of Business Contracts
There is a broad range of contracts that Austin, TX businesses use as a foundation of their collaboration with another party. Here’s a brief explanation of a few types of contracts that every business should know about.
The first step toward building a successful business often includes creative collaboration, brainstorming, and sharing your ideas with potential investors and other parties to produce the business model’s foundation.
A non-disclosure agreement (NDA) helps protect you and your ideas. This type of business contract is a legal agreement between two or more businesses outlining confidential or restricted access to information. It obliges the involved parties in strict confidence to only utilize the proprietary information for partnership, evaluation, and other specific purposes, such as employment, with the proprietor’s permission.
An NDA contract would give a business owner legal status if a vendor, service provider, or supplier shares confidential or proprietary information without the proprietor’s consent or knowledge.
General Employment Contract
Hiring employees shows success and growth within a brand, and every business needs staff to thrive. Having an employment contract in place helps businesses clarify the roles and duties they want their employees to fulfill while establishing what they will receive in return.
A general contract also outlines applicable employment law, benefits, compensation, employment duration, grounds of termination, and other essential details a business wants its employees to know while being legally protected by the law.
A successful partnership agreement helps map out the responsibilities and relationships between two or more businesses or partners. This type of contract sets the tone regarding each partner’s individual obligation, profit/loss distribution, and ownership interest, and usually has a partnership dissolution clause.
Note: The terms and conditions of a partnership agreement are subject to a state’s individual laws. Speak to experienced business lawyers at the Kelly Legal Group to learn more about the laws regulating a partnership agreement in Austin, TX.
Property and Equipment Lease
Purchasing property and equipment outright may not be an option for many companies, especially for small business owners. A property and equipment lease helps businesses get the tools they need to succeed without having to spend all their money upfront.
It spells out the terms and conditions for leasing a piece of office space, retail space, entire building, equipment, or tools. The contract defines the “lessor” and the “lessee,” along with the roles and responsibilities of each. It outlines periodic payments to be made in exchange for using the property or equipment for a certain amount of time. Terms, deposits, maintenance agreements, and other details related to leasing property and equipment are also included in the contract.
Importance of a Successful Contract in Austin, Texas
A contract plays a vital role in any business transaction, irrespective of what the transaction includes, such as money, services, employment, or something else. Apart from making the agreement legally binding between two or more parties, a contract also provides other advantages.
Here are some reasons why every business in Austin, TX needs binding contracts in order to seamlessly execute their business operations.
Contracts Serve as a Commitment Between Parties
A contract is a representation of a relationship between two parties. The agreement outlines the terms and conditions that both parties agreed upon, along with the promises and obligations each must fulfill within a specified period of time.
Contracts Mitigate Risk and Prevent Business Disputes
Often, contracts go through a negotiation phase that ensures both parties are getting the best deal. The terms are laid out in the contract and both parties have the option to agree or disagree. Once the contract is agreed upon, it can be referred to if any disagreements arise. Without a contract to detail the terms and conditions, businesses could find themselves in legal disputes or business litigation matters.
For example: If Party A agrees to provide services or products to Party B at a certain price, Party B will lose all rights to negotiate with Party A after both parties sign the contract. If Party B later tries to pay a lower amount, Party A can simply refer to the contract.
Additional information: How an Attorney Can Assist with a Contract Dispute
Contracts Provide Security and Peace of Mind
In any business dealing, a successful contract provides security and peace of mind to all participants in a transaction. A written contract sets forth the terms between the parties with regard to their responsibilities and duties. Both parties can perform their duties knowing the other party is obligated to follow through with their duties and will face business litigation if they do not.
Contracts Prevent Expensive Litigation Proceedings
When any party involved in an agreement breaches the terms and conditions, a contract can be used as a general reference to determine who is at fault. Having a readily available written contract curtails the chances of bringing litigation proceedings. Moreover, a contract helps avoid the costs of legal representation and litigation services.
Contracts Promise Confidentiality
A business contract often includes confidentiality and non-disclosure provisions, thus protecting proprietary and sensitive information. Being a part of the contract, every concerned party is legally bound to hold in the secrecy of the information involved in a transaction.
Any party that violates the terms and conditions would be held liable under the agreement, and the contract will serve as a solid ground to prove that the party is actually at fault.
6 Elements Every Successful Contract Should Have
A contract legally binds every business transaction, therefore, it is indispensable for it to be successful. From bargaining to coming to an agreement, a contract is what cements the rights, obligations, and duties of all the parties involved.
Although contracts are infinitely varied in terms of length and complexity, there are some elements every successful contract should possess.
These elements include:
- The Offer
- Contract Acceptance
- Signatory Awareness
- Contractual Consideration
- Contractual Capacity
- Contract Legality
The Offer or Contractual Offer
Every contract starts with responsibility and desire. One party desires something and the other party takes responsibility for fulfilling it. Often known as a “contractual offer,” this is the first element of a successful contract that encompasses the responsibilities and duties of each participant.
Moreover, the offer should demonstrate the exchange of any type of value; it can be money or some desired outcome.
Technically, the first element is only considered a contractual offer when the requesting party (the offeree) receives it. The offer can still be revoked, terminated, or altered before the requesting party accepts it.
The offeree has the right to extend a counteroffer with the help of business law services by making changes to the terms and conditions in the contract. A counteroffer, when delivered to the other party, terminates the original offer, bringing both parties into the bargaining process to attain desired outcomes.
It is advised to only accept the contractual offer after your legal counsel or dedicated legal team reviews and approves it.
After receiving the contract, the requesting party can decide whether to agree or deny the proposal. The receiving party can communicate with the contractor in writing or verbally if they agree to accept the contract offer.
There can be many forms of contract acceptance, including option agreement, acceptance by action, and conditional acceptance.
The offeree can make changes to the contract and present it as a counteroffer. After both parties agree to the terms and conditions specified in the agreement, they can accept the contract.
For a contract to be successful and valid, all parties involved should know that they are entering into an agreement. In addition, all parties must be active participants in the contract, they must recognize that the agreement exists, and they must freely agree to be legally bound by the obligations mentioned in the document. As per business law, if any party fails to establish its awareness, it may void the contract.
For example, if one party signs a contract under pressure or under the influence of anyone, it may make the contract invalid or unsuccessful.
In a nutshell, it is critical for every party to be aware of the agreement for it to be valid.
Contractual consideration constitutes something of benefit to the party who makes a promise to provide something. Consideration in a contract incorporates the value that all parties involved have agreed upon, and that can be an item or an action. Services, property, and even protection from harm are all examples of contractual considerations.
The consideration does not always necessarily have to be money; it can be an exchange of services. In short, the contractual consideration defines what the parties have agreed upon at the time of accepting the agreement.
Contractual or Legal Capacity
In order for a contract to be successful, every party involved must have the capacity to agree to the terms. Moreover, a contract requires all parties to clearly understand the obligations and consequences before they sign the agreement.
A contract may be voided if it involves anyone who does not have the legal capacity to be a participant in the agreement. It may void the contract if any of the participants are:
- Going through any type of brain disorder
- Not understanding the terms specified in the contract
- Under the influence of drugs and alcohol or otherwise not in their senses
Every contract is subject to the laws of the jurisdiction in which they operate. For example, if a business in Austin, TX wants to form a contract with another party, the agreement must meet state laws.
For example, a contract for any illegal product or activity cannot be enforced. Even if the parties have no knowledge that their agreement does not abide by state and federal law, the lack of awareness is sufficient for the contract to be invalid.
Every contract should abide by local as well as federal laws in order to be successful and beneficial for the parties involved.
The Role of a Business Attorney in Making a Contract Successful
There are numerous contract templates available online that a business can modify and use. However, every business has a unique requirement, which may make the contract invalid, or may not serve the benefit the parties want.
Therefore, hiring a contract law firm helps a business review, negotiate, and ensure that the contract is valid under the law. Here are a few reasons why every business should have experienced business law lawyers by their side when working with contracts.
- They help you better understand the contract.
- They identify potential liability issues and resolve them.
- They ensure that the contract is valid as per the law and is legally enforceable.
- They ensure that any new state and federal regulations are adhered to in the contract.
- They offer suggestions and revise the contract as per your needs.
- They can respond to a breach of contract and can advocate on your behalf during any disputes.
Contract lawyers can give you complete peace of mind that you are entering an agreement you know inside and out. Moreover, a lawyer will make sure that their business clients understand and agree to the terms and conditions outlined in a contract and know exactly what they are obliged to do as per the agreement.
Kelly Legal Group: The Best Contract Business Lawyers in Austin, Texas
A contract is absolutely necessary for a business transaction to succeed, and having the right contract lawyer is equally important. At the Kelly Legal Group, we are highly experienced attorneys that can take care of your contract-related legal services for all types of businesses in Austin, TX.
From negotiating on your behalf to revising the contract and responding to a breach, we will do everything that benefits your business and protects your rights.
Call us at (512) 505-0053 or contact us online to set up a free consultation with a knowledgeable and experienced lawyer. We’ll help you get a contract drafted that meets your specific business needs!