Regardless of size, every business needs a reliable system for creating contracts in order to increase revenue and maximise value. Whether you are hiring someone to do work for you or entering into an agreement with another business, having a contract in place will always provide clarity and protect everyone involved. 

In recent years, there have been major changes in the creation of contracts. Pen and ink signatures are now being replaced by e-signatures. If you want to improve operational efficiency and preserve legal compliance, you should consider using proposal software that provides e signature solution to digitize and automate all the many steps leading up to the signing of a contract.

This guide will explain what is contract law and how contracts are used in business.

Then we’ll show you how to create your own contract using some templates.

What is a contract?

A contract is a legally binding agreement between two or more parties. It serves as evidence of a promise made by one party to another and is enforceable by law. When making a contract, each party must agree to specific terms which include the performance of certain duties, payment for services rendered or goods received, and other pertinent details.

The purpose of contracts is to ensure that both parties fulfill their obligations in accordance with the agreement when they are concluded. Contracts can be written or verbal, however, it’s best practice to have all agreements documented in writing so there is no dispute over any of the details later on. It’s important that each party understands the contents of the contract fully before signing because there are consequences if either side fails to honor its part of the agreement.

Why are client contracts important?

Client contracts are essential when it comes to running a successful business. Without them, there can be confusion about expectations and outcomes for both parties involved in the relationship. A client contract is an agreement that outlines the services provided by one party, as well as the terms of payment and any other conditions that need to be met before those services are completed. It also protects both parties from potential disputes or misunderstandings. 

Having a comprehensive client contract helps organizations have clear communication with their clients, reducing misunderstandings and allowing each party to understand what is expected of them. This document establishes expectations on both sides and sets out the details of how services will be delivered, including timelines, deliverables, milestones, and payment schedules. Client contracts provide an easy-to-understand reference for all parties involved in the project and serve as a reminder of their responsibilities.

When must a contract be in writing?

When it comes to legally binding contracts, one thing is certain: they must be in writing. Whether the contract is between two or more businesses, or between an employer and an employee, both parties need proof that the agreement was made and accepted.

Without a written contract, it can be difficult to prove that a valid contract exists between two parties. Written documents provide evidence of a contract’s terms and conditions as well as each party’s obligations and rights under the contract. 

A legally binding contract will also include signatures from both parties which serve as proof that they both agree to the terms of the contract. Having a written document helps protect all involved parties should any disputes arise regarding what was agreed upon or promised by either party. There are certain circumstances where a written document is required: 

• Contracts must be in writing if they involve the exchange of goods and services worth more than $500.
• Contracts must be in writing if the contract is for a period that exceeds one year.
• Any contract dealing with real estate must also be in writing.

Contracts vs agreement

Agreements and contracts seem similar, and in some ways, they are the same. However, there are a number of legal differences between an agreement and a contract.

Contracts

Contracts are formal agreements. They are enforceable by legal action, such as a lawsuit if one or more parties fail to comply with their terms and conditions.

Agreements

An agreement is usually an informal commitment (typically not in writing) between two or more people. In contrast to a contract, parties to an agreement rely solely on the honor system to fulfill their half of the bargain rather than being obligated by clauses or other legal provisions.

Elements for contract creation

A contract needs to have four important elements in order to be considered legal and valid. These are offer and acceptance, consideration, capacity, and intention to create legal relations. 

• For an offer to be eligible, it must be clear and unequivocal – meaning there can’t be any confusion as to what the other party is agreeing with. 
• The acceptance of the offer needs to meet this criterion too so that there is no misunderstanding on either side. 
• Consideration is when both parties give something in exchange for the promise being made; this could either mean goods or money (or both). 
• Capacity refers to both parties having the ability to understand what they are agreeing with due to their age or mental capabilities; if this isn’t present then a contract cannot become valid.

Types of contracts

• Simple contracts are agreements created with basic terms that are easily understood by both parties involved. 
• Verbal contracts rely solely on spoken words rather than written documents but still hold up in court if necessary. 
• Express contracts are clearly outlined in writing with all details included.
• Implied contracts do not have to be expressed in written words but rather exist through mutual understanding between two parties involved in a transaction.
• Bilateral contracts require an exchange of promises between two parties to perform certain obligations at some point in the future.
• Unilateral contracts on the other hand, only involve one side making a promise with no expectation of anything in return from the other side. This type of contract is often used when one party wishes to make a gesture without expecting anything in return.

Steps on how to write a contract

Here are some simple steps on how to write a contract that is both accurate and enforceable. 

• The first step when writing a contract is to identify all the involved parties; include full names, addresses, and contact information for each party. This will ensure that the agreement is between two or more people who can be tracked down if necessary.
• Next, specify the purpose of the contract; outline what services will be provided, when they will be completed, and what payment expectations are involved. Make sure all promises made by each party are included in this section since these make up the main points of negotiation.
• Write out each party’s responsibilities and be as specific as possible so there is no room for confusion or interpretation later on down the line. Also, make sure to include any deadlines or timeframes associated with these responsibilities.
• Make sure that all details are included, such as payment dates, products or services provided, deadlines for completion of work, and any other relevant information. 
• Finally, review all contracts carefully before signing them.

Can you make your own contract?

Yes, you can absolutely create your own contracts and include customized clauses like warranties. Fresh Proposals has business contract templates that can help you create customizable contracts for you.

Whether you are creating a sales contract or an employment contract, Fresh Proposals offers contract templates for a number of different contract types.