Tips for reading a Business Contract

Last Updated at: October 23, 2019
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Tips for reading the business contract

It is of the utmost importance that everyone has a basic sense of understanding legal contract and agreement. At one or another point in life, one may be encountered with such a contract- be it a family arrangement or a business contract. Contracts are legal documents which set out the terms and conditions involved in any transaction or as a resolution to any dispute. The subject matter of a contract could either be a commission of a said act or the omission from doing an act.

It is important for everyone to have a basic understanding of the legal contracts as well as agreements. There are various types of business contracts that can either be an employee contract or a sale agreement. Here, you will get to know some key points that should be read before signing a business contract.

Get Legal Advice from Experts

There are different types of business contracts which could either be a sale agreement or an employment contract. The terms of a contract once accepted is binding upon both the parties and the is deciding their future course of action in that regard. Therefore, it is of utmost importance that one is in full cognizance of the terms before giving acceptance to it. Here are some essential points one must keep in mind in order to meticulously read a business contract.

  • Essentials of a Legally Valid Contract: Once you begin to read the contract and accept it, make sure that it is legally valid. In order for a contract to be legally valid, it must contain the following pointers. Firstly, a business contract must be unequivocally clear in its terms of the agreement. There should be absolutely no ambiguity or vague clauses. Secondly, it should be extended so as to cover the occurrence of all foreseeable situations. A contract is an agreement, therefore the commitments set forth must be stated for each of the sides. If the following guidelines are not followed then there are chances that the contract may be brought in for litigation at a later stage. Therefore, in order to avoid any kind of conflict, these points must be kept in mind.
  • Definition Clause: A definition clause only helps to further interpret the terms of the contract, therefore it is better that as per mutual agreement within the parties, a definition clause for all important terminologies used be mentioned in the contract itself. The definitions as agreed upon cannot be entirely different from the usual meaning of the word in legal parlance, but rather should be more specified in nature.
  • Through Reading: For reading a Business Contract, do not attempt to read it in pieces or identifying what is relevant to your purpose. Every clause in the said contract has the potential to be used in your favour as well as against you. While reading a business contract, one must clearly identify these clauses and the consequences it might pose to have. In the case of careless reading, it is very much possible that you ignore some important clauses, which at a later stage pose a problem and make you a party to tedious litigation.
  • Check on the details and identification of the Parties: The details of both the parties should be clearly mentioned in a Business Contract. Details like your name, age, address, occupation, etc. Moreover, it is important that you are identified correctly. What is peculiar in business contracts is due to a separate corporate legal personality of the business, it is mostly the business who will be a party to a given contract and not any individual. Also, make sure that the contract is clear enough to identify the other party as it may be necessary for future disputes and litigation.
  • Avoid Assumptions, Seek Clarification: It is very much possible that the business contract has many legal intricacies which a layman would not completely understand on a plain reading of the clauses. Therefore, wherever there is a speck of doubt, it is always good to seek for legal advice and get it completely deconstructed before it goes ahead to open doors for flooding litigations and unwanted liabilities of performance.
  • Relief in case of Breach: Make sure that the contract contains a clause relating to the performance or relief which is expected in case there is a breach of the said contract. Make sure it is amply weighed and is not blown out of proportion. Also, read carefully and negotiate on the clause which the other party mentions if the breach takes place from your end.  Negotiations should be in a manner to cut down your liability as far as possible and to get the most out of the contract.

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Tips for reading a Business Contract

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It is of the utmost importance that everyone has a basic sense of understanding legal contract and agreement. At one or another point in life, one may be encountered with such a contract- be it a family arrangement or a business contract. Contracts are legal documents which set out the terms and conditions involved in any transaction or as a resolution to any dispute. The subject matter of a contract could either be a commission of a said act or the omission from doing an act.

It is important for everyone to have a basic understanding of the legal contracts as well as agreements. There are various types of business contracts that can either be an employee contract or a sale agreement. Here, you will get to know some key points that should be read before signing a business contract.

Get Legal Advice from Experts

There are different types of business contracts which could either be a sale agreement or an employment contract. The terms of a contract once accepted is binding upon both the parties and the is deciding their future course of action in that regard. Therefore, it is of utmost importance that one is in full cognizance of the terms before giving acceptance to it. Here are some essential points one must keep in mind in order to meticulously read a business contract.

  • Essentials of a Legally Valid Contract: Once you begin to read the contract and accept it, make sure that it is legally valid. In order for a contract to be legally valid, it must contain the following pointers. Firstly, a business contract must be unequivocally clear in its terms of the agreement. There should be absolutely no ambiguity or vague clauses. Secondly, it should be extended so as to cover the occurrence of all foreseeable situations. A contract is an agreement, therefore the commitments set forth must be stated for each of the sides. If the following guidelines are not followed then there are chances that the contract may be brought in for litigation at a later stage. Therefore, in order to avoid any kind of conflict, these points must be kept in mind.
  • Definition Clause: A definition clause only helps to further interpret the terms of the contract, therefore it is better that as per mutual agreement within the parties, a definition clause for all important terminologies used be mentioned in the contract itself. The definitions as agreed upon cannot be entirely different from the usual meaning of the word in legal parlance, but rather should be more specified in nature.
  • Through Reading: For reading a Business Contract, do not attempt to read it in pieces or identifying what is relevant to your purpose. Every clause in the said contract has the potential to be used in your favour as well as against you. While reading a business contract, one must clearly identify these clauses and the consequences it might pose to have. In the case of careless reading, it is very much possible that you ignore some important clauses, which at a later stage pose a problem and make you a party to tedious litigation.
  • Check on the details and identification of the Parties: The details of both the parties should be clearly mentioned in a Business Contract. Details like your name, age, address, occupation, etc. Moreover, it is important that you are identified correctly. What is peculiar in business contracts is due to a separate corporate legal personality of the business, it is mostly the business who will be a party to a given contract and not any individual. Also, make sure that the contract is clear enough to identify the other party as it may be necessary for future disputes and litigation.
  • Avoid Assumptions, Seek Clarification: It is very much possible that the business contract has many legal intricacies which a layman would not completely understand on a plain reading of the clauses. Therefore, wherever there is a speck of doubt, it is always good to seek for legal advice and get it completely deconstructed before it goes ahead to open doors for flooding litigations and unwanted liabilities of performance.
  • Relief in case of Breach: Make sure that the contract contains a clause relating to the performance or relief which is expected in case there is a breach of the said contract. Make sure it is amply weighed and is not blown out of proportion. Also, read carefully and negotiate on the clause which the other party mentions if the breach takes place from your end.  Negotiations should be in a manner to cut down your liability as far as possible and to get the most out of the contract.

What is the current GST rate in India?

The Goods and Service Tax or GST has a variable rate in India, ranging from 18 % for soaps to 28 % for detergents. Understand the procedure for GST registration and GST returns here.

How do banks assess the working capital requirements of borrowers?

Banks and other financial institutions use various techniques to know what fits the situation to assess the working capital requirements of those requesting to borrow money.More on Income Tax Return Filing.

What does the Aadhaar number have to do with filing of tax returns?

Every tax payer require a unique Aadhar number as it is to be linked with the PAN card. There are exemptions for who Aadhar is not required for applying for PAN. card. Learn more about ISO Certification.

What is the purpose of ISO standards?

The main purpose of ISO standards is to make sure that the services and products are safe, good quality and reliable.More info on NGO Registration in india.

What is the benefit of ngo?

NGOs play an invaluable role in the upliftment of the society by investing funds received from various sources like Government, foreign individuals, firms or corporations etc.More about Udyog Aadhar Registration.

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