Why Entrepreneurs NEED Contracts
Especially for you
As a new entrepreneur, the concept of contracts can be overwhelming. It’s easy to think of them as just a necessary evil, a bunch of legalese that you need to slog through in order to do business. But contracts are actually one of the most powerful tools available to you. They can be the difference between success and failure.
Imagine you’re on a hike, and you come to a fork in the trail. One path leads to a sunny meadow filled with wildflowers, while the other path leads to a dark, treacherous canyon. If you’re like most people, you’ll probably choose the meadow. But what if I told you that the meadow is only accessible if you first navigate the canyon?
You see, the canyon is where the real adventure is. It’s where you’ll find the true treasure. In the same way, contracts can seem like a hindrance, but they’re actually what will lead you to success.
So, how are contracts formed? At its core, a contract is simply an agreement between two or more parties. This agreement can be expressed in writing, spoken, or even through actions. In order for a contract to be formed, there must be an offer made by one party and an acceptance of that offer by the other party.
But just because there’s an agreement doesn’t mean it’s a legally binding contract. For a contract to be enforceable, it must also meet certain requirements. The first requirement is consideration. This means that each party must be giving something of value in exchange for something else. For example, if you’re hiring a contractor to build a website, you’re giving them money and they’re giving you a website.
The second requirement is legality. This means that the contract must not involve anything illegal or against public policy. For example, a contract to commit a crime would not be enforceable.
The third requirement is capacity. This means that the parties entering into the contract must be legally capable of doing so. For example, a minor under the age of 18 is not capable of entering into a contract.
Finally, the fourth requirement is that the contract must be entered into voluntarily. This means that the parties must have entered into the contract freely and without coercion.
“A contract is not a contract until all the parties have agreed. There is not contract if the minds of the parties have not met.” -Willie Sutton
So, what happens when one party breaks a promise? This is called a breach of contract. When a party breaches a contract, the other party is entitled to certain remedies.
These can include monetary damages, specific performance (i.e. the other party must still fulfill their end of the contract), or cancellation of the contract and release of the parties from their obligations. The specific remedy will depend on the type of contract, the terms of the contract, and the nature of the breach.
In the case of monetary damages, the injured party can seek compensation for any losses that resulted from the breach. For example, if a contractor fails to complete a website on time and the delay causes the business to lose money, the business can seek compensation for those losses.
Specific performance, on the other hand, is often used when monetary damages would not be sufficient to remedy the situation. This can happen when the thing that was promised in the contract cannot be replaced by money.
For example, if an artist agreed to paint a portrait for a collector and then failed to deliver, the collector may be able to seek specific performance, which would require the artist to complete the portrait.
Cancellation of the contract and release of the parties from their obligations is often used when the breach is so material that it is impossible to remedy it with any other remedy.
This can happen when the breach is so fundamental to the contract that it undermines the entire agreement, or when the relationship between the parties has been irretrievably damaged. For example, if one party fraudulently misrepresents themselves or their abilities, the other party may choose to cancel the contract and walk away.
It is important to remember that contracts are not always verbal, they can be written or even express through conduct. This is where a lawyer can be of great assistance and can help you drafting a contract that is legally binding and meets all the requirement mentioned earlier.
A contract is a living document and it should be reviewed regularly and updated if necessary. It is a key tool that entrepreneurs use to protect their interests, and the key to a successful business.
If you take the time to understand the nature of contracts, you’ll find that they can be a powerful ally in your business ventures, and a valuable means of preventing disputes and resolving them when they do arise.
“A contract is a promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies.” -Cornell Law School
In conclusion, contracts are agreements between two or more parties that creates legally binding obligations. To be enforceable, they must meet certain requirements such as consideration, legality, capacity, and voluntariness. Breaching a contract can lead to different remedies such as monetary damages, specific performance, and cancellation of the contract.
As a new entrepreneur, it is important to be familiar with the basics of contracts and seek legal guidance when necessary to ensure that your business is protected and runs smoothly.
