50+ Sample Contract Agreements
What Is a Contract Agreement?
A contract agreement is a legal document made between two or more parties, outlining various terms and conditions such as an exchange, compensation, service, etc. The objective of a contract is to establish an understanding and acceptance of those terms and conditions.
According to the Judicial Education Center of the University of New Mexico, a contract needs to contain four key elements for it to officially exist. The four elements are offer, consideration, acceptance, and mutuality.
Processes in a Contract Agreement
When it comes to creating contract agreements, there are many actions involved. And whether you are the one drafting the agreement or at the receiving end of it, it is important to be aware of the basic procedures contract signing entails.
Drafting: Before writing your contract, ensure you have adequately planned and studied the scope and reasons for creating a contract. Sometimes, a verbal contract is not sufficient and documenting a promise in writing is the most practical way to move forward. When you’ve decided on your terms and conditions, map out your contract in an organized and clear manner. Offer: Once you’re satisfied with the agreement and terms, you may proceed with an initial offer. If you are a vendor bidding for a project, your offer should cover the important details such as obligations, scope of work, pricing, service guidelines and/or policies. State your terms and conditions as clearly as possible. On the other hand, if you are given an offer, make sure to read the fine print. You may choose to either accept the terms, proceed with negotiation, or reject it altogether. Negotiation: When two parties have conflicting views or have yet to reach a mutual agreement, they may choose to sit down for a negotiation. This can be achieved by scheduling meetings or through authorized representatives. For instance, three business partners decide to put up a startup company, but one partner may disagree with the other’s ownership shares, or he wants a bigger percentage of the profit. The parties eventually hold a series of negotiation meetings before reaching a final decision. Counteroffer: If the contract agreement is not one-sided, the responding party can make a counteroffer. Upon review, if some terms are unsatisfactory or are found to be inconsistent with the verbal promise, he or she may negotiate further by responding with a counteroffer. For example, a job applicant has fulfilled all requirements and a prospective employer gives her a job offer. However, the applicant feels the compensation does not justify the expected workload. She can then reply with a counteroffer. An applicant has every right to negotiate for better remuneration, if he or she can make a valid case for it. Legal Consultation: Since it is a legal document, you are free to seek counsel from your lawyer. If you are in doubt or receive a contract agreement that has vague or unclear stipulations, it is best to ask legal advice. In the same way, if you are unsure of the contract you drafted or want a professional to review it for you, you are free to seek legal consultation. Documentation: Contracts and agreements are basically paperwork. They may be paperwork, but they are necessary paperwork. Make sure to properly document any offer or counteroffer given to you. It’s always best to keep important contracts on file. In some cases, contracts need to be amended and having it on record can not only save time, but also serve as a guide and reference for any future revisions.
The Downside Of Failing to Prepare a Contract Agreement
Having a contract agreement has multiple benefits and failing to prepare one, especially in the case of official business transactions, can result in unnecessary problems and will only hassle either party. The following are some of the major disadvantages of not having a contract agreement:
Miscommunication: A verbal promise can technically be called a contract. But there are limitations to an unwritten agreement. Verbal promises are easily broken, and it can be easy to go back on your word without having any kind of accountability. Parties cannot solely rely on memory and word of mouth for serious agreements, especially ones involving money, property, services, and the like. A contract agreement that is properly documented and clearly defined will decrease the likelihood of any miscommunication. It will help establish ground rules and hold both parties accountable. Unnecessary Arguments: An agreement without written proof is bound to create unnecessary conflict between the parties. This can often be the source of misunderstandings and petty arguments, that could have been avoided with the presence of a written contract. The parties involved will only end up in a word war of ‘he said, she said’. Legal Implication: If you decide to sue another person or company, you need to have proper documentation and evidence to build a case against them. Courts rarely entertain petitioners who are unable to show any hard proof of fault or business transgressions. Because legally, it’s hard to establish proper facts without the necessary documents to back and support your claim or claims. If one party was unjustly paid, he cannot just go to the courts based on the oral promise a corporation has made. He needs to present the right contracts and prove that the company agreed to pay him the particular amount. The amount, along with the terms and conditions of payment, should be explicitly stated in the contract.
Types of Contract Agreements
There are several types of business contracts and an even wider array of formal agreements. The following are examples of specific types of contracts that are commonly used in business and are recognized by law.
Service Contract: A service contract is made between a client and a vendor. The client enlists the services of a vendor to address a business need. These types of contracts are common in the construction industry. It often pertains to a client (usually a developer or real estate company), who outsources a third party or independent contractor. The contract outlines the work to be done, materials, timeframe, deadlines, and payment guidelines. Partnership Contract: This business contract involves two parties that decide to venture into business together. Its scope involves all matters pertaining to the business relationship of the partners. It usually details and assigns the duties, roles, and powers of each partner. It can also include conditions stating how the profit will be shared, how long the partnership may last, and what the guidelines are in the event that a party wishes to withdraw or terminate the partnership. Indemnity Contract: An indemnity contract is made between two parties, sometimes referred to as the releasor and the releasee. A releasor is a participant or the one engaging in a service or activity that involves potential risk. The releasee is the party that provides that service or sponsors the activity. A releasee may be an individual, a private company, or any organization. By signing an indemnity contract, the participant (releasor) agrees to release the company (releasee) of any liability or responsibility for any untoward incident, loss, or damage. This contract may also be referred to as a release of liability or a liability waiver. Settlement Contract: When two or more parties are at odds with each other, neither one may want to go to court. Having to go through legal proceedings can take unnecessary time, energy, and money. Both parties want to avoid any long, drawn out legal battle. In this case, both may agree to a settlement provided they reach an agreement where both parties are amenable to the terms and conditions. In many cases, the offending party offers a settlement amount or agrees to uphold a promise; while the aggrieved party accepts the offer and decides not to to pursue any legal action against them. Franchise Contract: For companies who offer franchising options, a contract agreement must be made between the franchisor and the franchisee. This type of contract states the specific terms involving the scope and limitations of the business relationship. It should include the duration of the franchise, initial and renewal fees, details of the franchise site location, support, and development plans. Employment Contract: When a company’s human resources office hires a new employee, they are required to draw up an employment contract. It should detail the relationship between the employer and the employee. The contract should outline the new hire’s roles and duties, compensation, benefits, length of tenure, termination policies, etc. Sales Contract: There are many types of sales-related contracts. This type of contract generally involves a purchase, transfer, or sale of either a property, product or service. A common example is a warranty. When a person buys a new product, it often comes with a warranty that stipulates the buyer can have the item repaired or replaced within a set period of time. A purchase order is another example of a contract. Businesses who need to outsource materials, need to submit purchase orders to a supplier indicating their commitment to buy an item. The contract should include the total price amount, item description, payment, and delivery guidelines.
How to Write a Contract Agreement
Depending on what type of contract you need, be sure to prepare the necessary details beforehand so it’s easier to craft the agreement. Whether it’s a simple and straightforward contract, or a lengthy memorandum, be sure to keep these steps in mind:
Step 1: Establish the Parties Involved
If you are the drafting party, always indicate the complete details of all parties, including yours. Your contract should start out by mentioning the complete names, addresses, company names, designation, and all other required details of the parties. Formats may differ and it’s best to decide on one prior to creating a contract agreement. There are dozens of templates to use as a guide. Choose one and fill in the necessary information.
Step 2: Include the Stipulations
State your terms and conditions and itemize them accordingly. For service contracts, stipulations usually cover the materials, order description, total amount, construction deliverables, due dates, etc. In the case of franchise agreements, the franchisor should briefly describe the relationship of both parties, indicate the agreed fees, mention training and business support plans, and include any other requirements.
Step 3: Review and Sign
Once you’ve drafted your contract agreement, review it or have someone proofread it before sending it out to the concerned parties. It’s not necessary for a lawyer to review your contract, a trusted friend or a business adviser may also examine it.
Step 4: Respond Accordingly
Wait for the other party’s response and respond accordingly. The receiving party can either accept the offer, negotiate with you, or make a counteroffer. Further, contracts can be amended until everyone reaches a mutual agreement and all parties are satisfied with the terms.
FAQs
How do you write a contract agreement?
Start by providing the details of each party involved. Proceed by itemizing and specifying each stipulation, depending on the nature of your contract. The terms and conditions make up the most important section of your agreement. Review your contract more than once, and make sure you leave adequate space for both parties to sign.
What is a contract agreement in construction?
Contracts are a basic part of construction processes. Agreements may range from quotations, purchase orders, unit price contracts, to contractual labor agreements. Most construction contracts stipulate the work or service to be rendered, materials, item description and quantity, pricing, construction guidelines, and terms of payment.
What is a subcontract agreement?
A subcontract agreement generally implies that a company seeks external labor to get a job done. Many businesses outsource services or raw material. For instance, a real estate company may have in-house designers and architects but despite this, they still opt to hire an external agency to design a commercial building. The subcontractor in this particular instance is the design agency.
A contract agreement is one of the most basic formal documents. Chances are, you have seen a contract at least once in your professional life. No matter how simple or all encompassing a contract may be, it is a binding agreement and an official document recognized by law. Whatever your business needs, make sure your contracts are clear and effective. Download a contract agreement sample and start making one today!
