The Business Owner's Roadmap: Contracts

Contracts are the backbone of business relationships. They're everywhere. However, their intricate details often elude even the most seasoned business professionals. Let's simplify contracts and understand their various forms.

What is a Contract?

At its core, a contract is a legally binding agreement between two or more parties. This agreement usually pertains to business aspects like sales, rentals, or employment.

Key Components of a Contract:

1. An Offer: A proposal or suggestion.

2. Acceptance: Agreement from the other party.

3. Intent to be Bound: Both parties must genuinely want to fulfill their promises.

4. Consideration: Something of value exchanged between parties, like money, services, or goods.

Imagine it as a handshake deal, but on paper and enforceable by law.

Types of Contracts: One Size Doesn't Fit All

Just like there's more than one way to enjoy the coffee, whether it's black, a latte, or a cappuccino, there's a variety of contracts designed for different situations. Let’s examine some of them:

1. Express Contracts:

Explanation: These are clear-cut contracts where the terms are explicitly stated. They can be oral or written, though having them in writing is always better if disputes arise.

Real-life Example: You order a custom cake from a bakery. The baker tells you the exact

price, flavor, and pick-up date. You agree. That's an express contract.

2. Implied Contracts:

Explanation: These aren't spelled out but are understood from the behavior of the parties involved. For instance, if you work at a shop and get paid regularly for your services, even without a written agreement, there's an implied contract in place.

Real-life Example: You've been getting a haircut from the same barber for years. You walk in, get a cut, and pay. Even though there’s no written or spoken price agreement, the repeated action implies an understanding.

3. Unilateral Contracts:

Explanation: Here, only one party promises an action or performance, provided the other party takes a specific action.. An example would be a reward offer for a lost pet.

Real-life Example: Imagine you lose your dog. You put up flyers offering $100 to whoever finds and returns it. You're making a promise to pay, but only if someone completes the action of returning your dog.

4. Bilateral Contracts:

Explanation: The most common type where both parties exchange mutual promises. It's a two-way street of promises.

Real-life Example: You agree to sell your bicycle to a friend. You promise to give the bike, they promise to pay $100. Both sides have obligations.

5. Executed Contracts:

Explanation: These contracts have been fully performed by all parties involved.

Real-life Example: You buy a book from a bookstore, pay for it, and take it home. The store has given you the book, and you've paid them. Contract executed.

6. Executory Contracts:

Explanation: This is the "awaiting action" type. Some obligations are yet to be fulfilled by one or both parties.

Real-life Example: Imagine pre-ordering the newest model of a popular coffee machine. You've committed to buying it, and they've committed to delivering it on release. Until then, it's executory.

7. Adhesion Contracts:

Explanation: Ever faced a "this is what we offer, take it or leave it" scenario? That's an adhesion contract, where one party sets the terms, and the other party can either agree or walk away.

Real-life Example: When installing a new app on your phone, you're often presented with terms and conditions. You can't negotiate them; you can only accept by clicking “I agree” or decline and walk away.

8. Aleatory Contracts:

Explanation: The element of chance plays a role here. Obligations arise only if a specific uncertain event takes place.

Real-life Example: Insurance contracts. You pay premiums, but the insurer only needs to pay out if an insured event (like a car accident) occurs. For example, the farmer pays premiums, but the insurer only compensates if an unforeseen event, like a flood, affects the crop.

9. Conditional Contracts:

Explanation: These contracts operate based on a 'what if' scenario. Performance is contingent upon a specific condition being fulfilled.

Real-life Example: A buyer places an order for custom-made furniture, with the agreement that the payment will be made once they inspect and approve the craftsmanship. Another example can be; a musician is booked for an outdoor concert, but the contract states they'll only perform if the weather permits. Rain would mean no performance.

Why Contracts Matter

Contracts might appear complex, but they're essential for business harmony. Understanding them ensures smoother transactions and fewer disputes.

Need Help with Contracts?

The attorneys at Sari Law Firm are here to guide you. Whether it's drafting a contract or seeking advice on contracts, we offer clear legal support.

Remember, when in doubt, always consult a professional before making contractual decisions.