Creating a Sound Business Contract

Creating and establishing business contracts and agreements is a regular part of owning a business; however, many business owners may be unsure of the best ways to draft such an important document. Here, The Law Offices of James A. List provides guidance on how to ensure the business contracts you create are properly written and legally enforceable.

Always Develop a Written Contract

Although spoken agreements may be legally enforceable, it can be very difficult to do so—as such, it is always advisable to have a written copy of any business agreement or contract you develop, even if Maryland law does not require it for the specific type of contract. This also helps to prevent confusion, because the terms of the agreement are clearly written out so that each party understands the expectations of the other party.

Ensure Your Written Contract Has Five Parts

In Maryland, there are five parts to any legally binding contract. These parts are as follows:

  • Competent Parties: A legally sound contract must detail who is bound by the terms of the contract. Minors and those who are mentally incapacitated are not considered competent parties, and as such they cannot be bound by a contract. Be sure to include the full, correct name of the party in question: for example, if the party is a business that is structured under an LLC, include the LLC suffix within the name.
  • Offer: A proposal to pay or do something must be found within the contract, and this proposal must contain terms and conditions. If one party refuses the terms of the offer, a counter-offer should be provided. Spell out all of the conditions in full, even ones you agreed upon orallyif you must file a lawsuit over the contract, a judge might only consider what is within the “four corners” of the contract.
  • Acceptance: Once the offer has been agreed upon, it should be documented in writing, with the signatures of each party included.
  • Consideration: Each party must benefit in some way under the contract, no matter how small of a benefit it may be. As long as each party is required to perform some sort of task under the contract stipulations, this criterion is usually considered to be met.
  • Performance: The obligation within the contract must be met. If the obligation is met, the contract is considered to be complete—if it is not met to the satisfaction of the parties, then a lawsuit may follow.

If a component of the agreement is accidentally left out, a short, written amendment may be added. The language used in the contract does not need to be complicated or elevated—short, simple sentences within numbered paragraphs ensures that all parties easily understand what is expected of them.

Agree How to Handle Disputes and Confidential Information

Although not legally required, it can be beneficial to include language within the contract that explains the agreed-upon procedure for handling disputes. This can include arbitration, mediation, litigation or any other legal dispute resolution process. Deciding upon a way to handle disputes before they happen ensures that time and money is not spent needlessly on a lawsuit.

It is also beneficial to add a clause within the contract that assures each party that any sensitive information made available to either party will remain confidential while performing the terms of the contract. This provides peace of mind to all parties involved.

Have a Qualified Business Attorney Review Any Contracts Before You Sign Them

Whether you have written a contract for another party, or are being asked to sign a contract, it is always valuable to have an experienced business attorney review the contract to ensure it is legally compliant and appropriate. The Law Offices of James A. List has years of experience drafting, reviewing and disputing business contracts and agreements—if you are a business owner, and have questions about a business contract or agreement, contact us today for a free consultation.

Baltimore Office

11019 McCormick Road, Suite 400

Hunt Valley, Maryland 21031

Eastern Shore Office

5700 Coastal Highway, Suite 100

Ocean City, Maryland 21842