Understanding the key elements of a business contract

On Behalf of | Jun 1, 2022 | Contract Law |

Taking an idea and building it into a business is a rewarding yet often challenging experience. Building a successful business in North Carolina, or anywhere, takes a lot of time and effort. Whether your business is still in its startup phase or has been operational for some time now, it’s never too soon or too late to learn more about business contracts. Contracts are an integral component of business life.

The last thing you want is a legal problem associated with a contract, although this type of issue is not uncommon in business. While there’s no way for you to have a 100% guarantee that a contract-related dispute will never arise, the more you know about contracts ahead of time, the better able to avoid legal complications you might be.

A business contract contains a promise to do or not do something

The phrase “breach of contract” is something that’s likely to make you cringe if you’re a North Carolina business owner. Not only do you not want someone to accuse you of disregarding the terms of agreement in a contract, you also don’t want to have to accuse anyone else of the same because such issues can be complex and difficult to resolve.

If a dispute does arise, however, and litigation is necessary, one of the first things you must prove in court is that a legally binding contract did, in fact, exist between you and the other party or parties. A key feature of a legitimate contract is that at least one party has promised to do something or to avoid doing something.

A contract demonstrates consideration of value

Another primary feature of a business contract is “consideration of value.” If you or the other party has promised to do or not do something, it’s typically in exchange for something of value, be it money or a service provided or other agreement.

If someone gives you a gift, there are “no strings attached.” What makes a business contract unique and legally enforceable, however, is the fact that there are typically one or more “strings attached,” or “terms” to which all signature parties have agreed.

Written versus oral contracts

In North Carolina, you don’t necessarily have to place the terms of a business contract in writing. In certain circumstances, you can create a legally binding contract without written terms of agreement. In such cases, one must speak or imply the offer, consideration of value and mutual acceptance through conduct.

This is where business contract legal issues can become complex. It’s typically easier to prove that a business contract exists when you can show the terms of agreement in writing.

The court can review every business contract case by its own merits

In every state, including North Carolina, the Statute of Frauds — a doctrine the court uses to help form its decisions in cases where there is a contract dispute — governs business contract issues. The doctrine requires certain types of contracts to be legally enforceable, only if they exist in writing.

Protecting your interests in a business contract

It’s always best to make sure you clearly understand the terms of agreement proposed in a business contract before signing your name on any documents. The same goes for agreements spoken, not written. If you’re unsure about the definition of a specific business or legal term, it’s better to seek clarification from someone who is well-versed in North Carolina business law than to take a chance in signing a contract based on your limited understanding.

Careful wording of a contract helps avoid problems. Incorporating as much detail into an agreement as possible also helps to establish clear terms and prevent disputes.