Essentials, Errors and Elements in Contract Law

In a small business, contracts are the direct responsibility of the owner. These contracts may be with a vendor, a customer, a contractor, an employee or another business.  In general, a contract is the agreement between two or more parties for the exchange of a product or service for a valuable consideration.

The attorneys and the team of legal professionals at The Shenon Law Group, located near you in the Los Angeles and the Sherman Oaks areas of California, advises its clients in the drafting, negotiating, modifying and the finalizing of business contracts. The Shenon Law Group practices in the fields of family, real estate, immigration, mergers and acquisitions and bankruptcy for the success and protection of its clients.

This post will cover the elements of a solid, enforceable contract, along with a list of contracts essential to any business and the common errors to avoid.

Essential Contracts

Contracts are an important element in the growth and in the protection of a business. When a contract is properly negotiated and prepared, all property of the business, real and intellectual, will be protected, disputes will be avoided, and the risks to the business and its owners will be limited.

Below is a list of some essential contracts, along with a brief description, that fall within the practice of business law in the LosAngeles and the Sherman Oaks areas of California.

1.       Service Contract – This contract outlines the terms and the scope of a service to be provided, or to be received, in exchange for valuable consideration.

2.      Employment Agreement/Offer Letter – This contract specifies the rights and the obligations between the company and every full-time or salaried employee.  Offer letters should include all components of the final agreement.

3.      Equipment Lease – This contract serves for both the leasing of equipment by the business and the business leasing out its equipment.

4.      Business Lease – This contract is for the leasing by the business of its office or its retail space.  This lease must specify the term, the rent, any amounts due not included within the rent, and all obligations between the landlord and the tenant.

5.      Confidentiality or Non-Disclosure Agreement (NDAs) – All potential employees should sign an NDA prior to any interview or meeting to protect the proprietary information of the company.

6.      Software or Website Terms of Use Agreement – This contract is for the business to know, understand and comply with all terms of software licensing and website usage to avoid fines and litigation.

All contracts need to be thought through, negotiated and finalized under the guidance of an attorney certified in business law and practicing in the Los Angeles and the Sherman Oaks areas near the location of the client.

Elements of a Solid Contract

Since contracts are essential to every business, there are key elements necessary for the contract to remain in effect.  These key elements are:

1.       Offer – This is the invitation to do business, whether in writing, by advertisement or by a product displayed in a window.

2.       Acceptance – The acceptance is solidified when a customer or a client agrees to the terms of the offer.

3.       Capacity – All parties entering into a contract must have the physical, mental and the legal capacity to do so.

4.       Undue Influence – Any negative influence, duress or coercion to entering into a contract is prohibited.

5.       Intention – All parties to a contract must intend for the terms of the contract to be binding.

6.       Legality – There are certain formalities that must be followed for a contract, and its purpose, to be legal.

A contract is breached when one party does not comply with the contract’s terms.  It is important to enter into, and to administer, a contract under the guidance of a business law attorney.

Errors Most Often Made in Contracts

An operating company means there will be contracts crossing over into business, real estate, bankruptcy and mergers and acquisitions, all with legal ramifications.  A contract that is poorly drafted will negatively affect the operations at the business level, and the owners at the personal level.

Under the guidance of an experienced business law attorney, below are some of the errors that will be avoided.

1.       Not Having a Valid Contract – Valid contracts are necessary regardless of the business structure or the employee relationships.

2.      Not Recognizing a Breach – A clear path and process must be in place for the handling of non-payments, non-deliveries, poor quality, poor performance, etc.

3.      Not Providing the Opportunity for Termination – Thinking beyond the breach and having an exit strategy in place will benefit all parties.

4.      Not Thinking about Dispute Resolution – Provisions allowing for mediation or arbitration before the formal litigation process will save both time and money.

5.      Not Specifying a Contract can be Assigned – The assignability of a contract is important in the case of a merger or an acquisition of any party.

6.      Not Considering Intellectual Property – From the first day, all employees must sign a contract to assign all intellectual property over to the company.

If you would like a consultation regarding all aspects of contracts and business law, then please contact the legal professionals at The Shenon Law Group, practicing in the areas of Los Angeles and Sherman Oaks in California, where new clients are always welcome.

The Shenon Law Group is trusted and highly recommended in the areas of business, real estate, family, immigration, mergers and acquisitions and bankruptcy laws.