The purpose of a contract

The purpose of a contract The purpose of a contract is to establish and formalize a relationship by clearly defining the terms and obligations . It ensures all parties understand what they're agreeing to and that there's no room for misinterpretation. Signing a contract demonstrates your commitment to the agreement and shows you are trustworthy, which helps in building strong relationships. After all, as set out by the Harvard Business Review , trust is the basis for almost everything we do. The document can also be used as a reference if either party wants to check the terms at any point. Contracts offer legal protection in the event of a dispute and can be used in a court of law if necessary. However, a clearly-written agreement can actually help you avoid drawn-out arbitration or even going to court at all, saving your business time and money. To be enforceable, contracts must contain these seven elements: Identification. The definition of all the parties to which the contract applies. Offer. The promise that one or both parties will (or will not, in the case of non-disclosure agreements ) perform a specific action. Consideration. Where something of value is promised in exchange for the actions. Acceptance. An expression that both parties have agreed to the terms.
Awareness. Proof (such as signatures) that both parties clearly understand and agree. Capacity. Each signatory has demonstrated the "legal capacity" to understand what they're signing. Legality. All contracts are subject to the laws of the jurisdiction under which they operate.
Uploaded by valeriepaolagonzalez on