One theme that is commonly discussed on this blog is the importance of contracts in business relationships and being prepared to handle a contract dispute if one arises. A step-by-step look at the life of a contract over the course of a business relationship may help answer some questions about how business owners should handle contracts in relation to their business and how to approach contract formation and contract disputes generally.
Contracts are an everyday part of business and memorialize business relationships between parties to the contract. Contract relationships can be created in the everyday course of business, though it is best to always have a contract in writing whenever possible. In the most basic sense, a contract is an agreement between parties that is legally enforceable. A contract creates obligations between the parties. Contract formation involves a couple of elements including that the parties are competent to enter into a contract and that there is mutual agreement between the parties concerning the agreement they are entering into
A contract is based on promises between the parties to perform their obligations but if one of the parties fails to perform, it may be considered a contract breach. When a contract has been breached, different remedies may be available to the non-breaching party. It can also depend on how the non-breaching party wishes to handle the contract dispute if they want to try to negotiate or if they want to litigate the dispute. Remedies that may be available include enforcement of the contract or damages for the breach.
Contracts are a cornerstone of the business economy which is why, for the health of your business, they are necessary to understand. Once a business owner understands how contracts are formed and what happens when they are breached, they are in a better position to protect their interests and the interests of their business.