How to Write Effective Business Contracts

Business contracts are legally binding written agreements between two or more parties. They are an important part of business and such agreements need to be created and/or reviewed carefully.

While smaller companies often conduct business based on informal handshake agreements or unspoken understandings, the more that is at stake, the more essential it is to have a signed contract. A contract serves as a guide and a memorial of the agreement that must be followed by both parties. It presents each party with the opportunity to:

• Describe all obligations they are expected to fulfill
• Describe all obligations they expect the other party or parties to fulfill
• Limit any liabilities
• Set parameters, such as a time frame, in which the terms of the contract will be met
• Set terms of a sale, lease, or rental
• Establish payment terms
• Clearly establish all of the risks and responsibilities of the parties