Businesses both large and small enter into many contractual relationships every year. Legally binding contracts are extremely important because they protect the interests of your business and define the relationship between you and the other contracting party. Many attorneys are skilled at writing contracts, but it is possible for you to draft your own. But if you do so, you must be extremely careful.
To be considered valid, a contract must contain two elements:
- There must be an agreement. The legal terms are “offer” and “acceptance.” For example, you need someone to clean your offices. You offer the job to Joe’s Janitors, and the company accepts and says they will do the job.
- And there must be consideration, which is a legal term that means “something of value.” In most cases, consideration will mean money.
At a bare minimum, that is all you need to create a legally binding contract. And in some cases, the contract does not even have to be in writing. If you call the owner of Joe’s Janitors and ask him to clean your offices once a week for $800 a month and he agrees, you have a valid contract.
In all cases, though, it is better to have contracts in writing. An oral contract, while legal, is open to misinterpretation and if the contract is broken, it is difficult to prove. And some contracts, such as an agreement to sell real estate, must be in writing to be considered valid. A written contract does not need to contain “wherefores,” “therebys” and “parties of the first part,” but can and probably should be written in plain language. It can be hand-written, typed or carved in stone. We have even enforced a contract that was written on a cocktail napkin.
If signed by the owners of both John Smith Inc. and Joe’s Janitors, the following is a valid contract:
“Joe’s Janitors will clean the offices of John Smith Inc. one time per week for the payment of $800 per month.”
While the above may be a valid contract, it is not a very good one. The devil is in the details. The phrase “clean the offices” can mean anything. Joe’s Janitors may consider a cleaning to be just picking up any trash on the floors while John Smith thinks a cleaning includes washing the walls and sterilizing the copy machine. John Smith may want the offices cleaned after business hours, but Joe’s Janitors believes doing the work at noon on Wednesdays is just fine. John Smith planned on paying Joe’s with a check at the end of each month, but Joe wants cash each week.
The terms and conditions found in the fine print of all types of contracts contain the details that really define the relationship and determine how the contract will be enforced. You should take care in defining the terms and conditions, and think of as many contingencies as possible so that each party knows exactly what is expected.
Before you sign any contract for your business, be it for an employee, a vendor, or a service provider, make sure that you understand everything in it. Signing a contract you don’t understand may be a mistake that you cannot afford. A contract should protect your interests, not cause you trouble.
Bellas and Wachowski
Attorneys at Law
15 North Northwest Highway
Park Ridge, Illinois 60068