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How important is a business contract?

On Behalf of | Oct 9, 2020 | Business Law |

Business contracts are likely the most important documents a business owner rely on when running a business. Making sure the contracts are enforceable and have the key elements that pertain to your business will ensure that it is protected in the event of a contract dispute.

Most contracts, including employment, lease and general business contracts, are determined by each state’s common law, which evolves over time through judicial decisions. However, contracts involving the sale of goods or the enforcement of a security interest fall under the Uniform Commercial Code, or UCC, or versions of it in each state. New York state revised its UCC in 2014 to conform to modern versions of the UCC, particularly Article 9.

What kinds of business contracts are there?

A basic contract is valid where there is an offer, acceptance of the offer and the consideration, which is the exchange of something of value between the parties.  Whether it is for money, services, personal or real property, or a promise to act (or not to), the consideration must be of value, even if not necessarily equal value.

The three general kinds of business contracts are express, implied and quasi-contracts. An express contract clearly states the provisions of the agreement. Although they can be oral, most business agreements are in writing because this provides the most legal protection for all parties.

The formation of an implied contract comes from the conduct of both parties. The intent of the parties can be determined from their behavior, and even though there is no formal agreement in an implied contract, it is no less binding than an express contract.

A quasi-contract is not a contract, but a court action that provides relief in a situation where neither of the above contracts exist and one side is unjustly benefitting from the actions or goods of the other party.

What do you do when the other side breaks the contract?

If one side does not fulfill his contractual obligations, he has breached the contract. When this happens, the other party can either demand that the contract be enforced, or he can seek damages for the harm caused by the breach.

The typical way of resolving a contract dispute is by filing a lawsuit in civil court. If the amount of damages is lower than $5,000 in Syracuse, then the case can go through small claims court. However, for complex cases, a small business owner needs resources that will help him to effectively write, execute and if necessary defend his business contracts.

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