Why Are Contracts Important for Your Business?

Female businessperson signs contract. Close up of female hand signing formal paper on the office table. Concept of Importance of Business Contracts.

When you own a business, you enter into numerous contracts that affect your operations and address a wide range of matters, from financing the business and securing supplies to hiring employees. The terms of each business contract establish your legal rights, obligations, and liabilities regarding the subject matter of the agreement. In Kansas, a complex body of statutory and case law govern every contract that you sign. Getting assistance with your contracts from the experienced business law attorneys at Sloan Law Firm helps you protect your rights, minimize legal liability, and ensure that your contracts are legally sound.

What are Business Contracts?

A contract is an agreement in which the parties create mutual obligations that are enforceable by law. For a contract to be legally valid and enforceable, basic requirements must be met. When a contract meets the legal criteria, a party’s failure to perform the established obligations, which is called breach of contract, can subject the party to legal liability, usually in the form of monetary damages.

The five legal requirements to establish a business contract are as follows:

  • Offer and acceptance
  • Consideration
  • Mutual assent or intention
  • Legal capacity
  • Legality

An offer consists of one party (the offeror) proposing to provide something of value in exchange for something else of value from the offeree. An offer can be accepted or declined. If it is accepted, and other requirements are met, the offer and acceptance establish the terms of the contract. Consideration is the value or benefit that each party receives from the contract. The consideration may be money, or it may be goods, services, or something else that provides benefit.

Mutual assent or intention signifies a meeting of the minds regarding the terms of the contract and an intention on the part of both parties to create a legally enforceable arrangement. In addition, for a contract to be valid, both parties must have legal capacity to agree to the contract, which generally means both parties are at least 18 years old and are not legally incapacitated. Finally, the contract must be for a legal purpose. Contracts entered into for illegal purposes are invalid and unenforceable.

A verbal contract can be legally enforceable in some situations. However, oral agreements are often difficult to prove and enforce. In addition, the law requires some contracts to be written and properly signed to be legally valid. For business purposes, every contract should be in writing and signed by both (or all) parties to the agreement.

Liability for Breach of Contract

When you enter into an agreement that qualifies as a contract, your rights, obligations, and legal liability — and those of the other party or parties — are governed by statutes, case law (common law), and the terms in the contract itself. Kansas statutes and court decisions apply to contracts made in the state. Federal law may also govern specific terms of a contract.

If either party fails to abide by the terms of a legally valid contract, a breach of contract occurs. The law and terms of the contract govern the legal remedies available to the party who suffers a loss as the result of the contract breach.

In many cases, recovering for losses caused by breach of contract terms requires a party to initiate a legal action in court. The court proceeding may address a wide range of matters relating to the contract, including whether a breach occurred. In most cases, the remedy for violation of a contract is financial damages for the party who was harmed. Courts very rarely force a person to perform according to the terms of a contract.

How to Protect Your Contract Rights

One of the important services provided by the business law attorneys at Sloan Law Firm is helping business clients maximize protection of their rights and minimize liability exposure in their contracts. We accomplish that goal in a couple different ways.

If you are asked to sign a contract relating to your operations, you should always have your attorney review the contract and discuss it with you before you execute it, to make certain you fully understand all the terms of the contract, including those relating to liability in the event of breach. If there are terms that are problematic, your lawyer can help you negotiate for better terms with the other party. Getting this help from your attorney can avoid potentially serious issues that can develop in the future if you sign a contract without legal review.

In addition, your lawyer should review any form contracts that you create and routinely use in your operations. Input from knowledgeable business counsel is the best way to protect yourself and your business, in the event issues arise under contracts you establish with customers, clients, or others during the course of your business.

Schedule a Consultation with Our Kansas Business Law Attorneys

Our business law attorneys at Sloan Law Firm assist business clients with a comprehensive range of matters affecting business financial and operational matters, including contracts. From our offices in Topeka and Lawrence, we help businesses of all sizes and types throughout the State of Kansas. We invite you to call us at (785) 357-6311 or by or using our online contact form to schedule a consultation.

Categories: Business Issues