What is a contract?
A business contract is a legally binding agreement between two or more parties to do or not to do certain things. For example, a business contract could be for the sale of goods or supply of services at a certain price. There are many different types of contracts including:
the sale and purchase of a business agreement;
leases of business premises;
leases of plant and equipment; and
The process for creating a contract generally includes information exchange, discussion, negotiation and employment agreements. What are the essential elements of a contract?
To be legally binding a contract must contain four essential elements. These four elements are: offer;
intention of legal consequences; and
The four essential elements of a contract can be briefly explained as follows; a contract is formed when one party makes an offer and that offer is accepted by another party for an exchange of some benefit or something of value by the parties (this is the consideration element). The intention of the parties is that they are legally bound by the contract. Can a contract be verbal or written?
Contracts can be verbal or written, provided they contain the four essential elements of a contract. However, a verbal contract is much more difficult to prove. Some types of contract such as those for buying or selling real estate and credit must be in writing. A written agreement is recommended as it:
becomes your proof of what was agreed upon;
prevents ambiguity or misunderstanding;
prevents either party forgetting or changing the terms later; and makes the parties focus on the essential issues and come to a definite agreement. Unless you're a lawyer nobody expects you to write your own contracts. However, as a business owner you're expected to be able to read a contract and understand what it means. http://www.smallbusiness.wa.gov.au/business-contracts/#elements
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