Contract Agreement Basics for Small Business Owners

Posted on by Ivana S. Taylor

You’re probably wondering why I’m covering business contracts here on DIYMarketers.  Well, if your intention is to get and keep customers without losing your business in the process — you’d better get to understand contracts a little bit better. contract

Before I get into this I want to make sure I say that THIS IS NOT LEGAL ADVICE.  I’m a marketer and not a lawyer, so please just consider that and be sure to review any contract decisions with a qualified attorney.

Now that we’ve gotten that out of the way — let’s get to it.

No matter what industry you are in or what your marketing strategy is you need to be able to handle contracts efficiently and effectively.  There are several things that DIY marketers need to know when it comes to contracts and contract management and with the proper knowledge and tools anyone can learn to handle contracts quickly and easily.

What is a Contract?

Put simply, a business contract is a legally binding agreement between two parties.  Contracts can be verbal or written; however for most contracts to be enforceable they should be in writing.  The specific information included in your contracts will vary depending on your needs, however all contacts have the same purpose.

Contracts are meant to clearly and expressly state exactly what each party intends to do, their obligations, any compensation, and information regarding dispute resolution or default.  Each party to a contract will acquire rights and duties that are relative to the rights and duties of the other parties.

Contracts do not need to be elaborate or lengthy.  They simply need to serve their purpose.  However in order for any contract to be legally enforceable it must include four main parts:

1. Offer & Acceptance: This is where all parties agree to the terms and conditions of the contract.
2. Mutual Consideration: All parties are exchanging something of value such as the exchange of goods or services for money.
3. Agreement to Bind: All parties agree that the contract is binding and cannot be altered without a new contract.
4. Legal Competence:  All parties must be competent under the law.  This means that all parties must be of sound mind and fully aware of what they are agreeing to and that all parties can legally enter into the agreement.  Contracts with minors are generally non-binding and unenforceable.

When Do You Need a Contract?

In business there are various circumstances when contracts are needed including: sales or purchases, partnership agreements, leases or purchases of property or equipment, employment agreements, and outsourcing agreements.

Depending on where your business is located you may have local laws regarding specific circumstances where contracts are required or what information must be included in them so take the time to do some research and make sure your contracts comply with your local laws.

You can choose to either write your contract completely yourself, use a premade template, or combine the two methods.  Entrepreneur offers hundreds of business forms and contracts available to download for free.

Contract Management

Entering into a contract is only the beginning; once a contract has been executed you must continue to manage that contract until all parties have fulfilled their obligations.  Contract management, or contract administration, includes monitoring relationships, addressing problems, handling changes or modifications, ensuring all parties meet or exceed expectations, and actively interacting with all parties to achieve the contract objectives.

Contract management can be a daunting task and most large businesses usually employ someone to specifically handle these responsibilities.  However, for the smaller business there are a number of resources available at various price points to help with contract management and administration.  These can range from online software services such as Contract Logix, up to full service agencies capable of performing all aspects of contract administration for a fee.  Take some time to evaluate your needs and research your options to select the solution that will fit your needs and your budget.

By learning about contracts, your local requirements, and contract administration, you will be better equipped to handle any situation that will require a business contract in the future.

Name: Ivana S. Taylor

Email: ivana@diymarketers.com

Website: http://diymarketers.com

About: Ivana Taylor is the publisher of DIYMarketers.com – an online marketing publication that provides marketing strategies that help entrepreneurs and business owners get and keep profitable customers. She is the DIY Marketing expert and book editor for Small Business Trends and a contributing author to AMEX Open Forum. Her strategic consulting firm, Third Force specializes in helping companies find their best customers and be the one they choose – regardless of price. Ivana is the co-author of Excel for Marketing Managers. You can find her on Twitter as @DIYMarketers.