Small business owners must have a basic knowledge of legal contracts. As the company grows,

contracts are likely to become a more important part of the business. Negotiating deals is a critical part of daily life for the small business owner. Unless you have a specific arrangement outlining other plans, no deal can be officially closed until the involved parties have reached an agreement on all aspects of a contract. Knowing how to prepare yourself is essential.

A business contract is a legally binding document that involves the exchange of services for an established value. In order for a contract to be legally valid in the United States, the offer inside the contract must be accepted by both parties. Contracts are used throughout the business world to ensure that agreements and interactions are carried out as planned. When used properly, contracts can be vital for a smoothly-flowing business as well as protecting you interests in the event of a breach.

The best way to avoid having that breach that turns into litigation is to have a carefully worded contract. In a solid agreement, you’ll feel comfortable that you have created terms that are achievable and fair. Business contracts are frequently used for leases and real estate, partnerships and joint ventures, franchise transactions, hiring someone or being employed as an independent contractor, confidentiality agreements, non-compete agreements, selling a business, and buying/providing services or goods to someone else.

Written contracts are much easier to uphold when compared with oral contracts because there is a reference to use regarding the actual terms of the agreement. It’s easier to go through litigation regarding breach of contract when there is paper proof of the exact terms that parties agreed upon. As a small business owner, you should be well-versed in the terms included in typical business contracts. Having an attorney draft and review your contracts can also make you more aware of the implications for your business.

Typical business contracts will include payment amounts, the names of the parties to the contract, the date the contract was signed and active, details of the services to be provided or received, due dates for payments, whether and how any interest on late payments will be calculated, expiration dates for the contract, renewal terms, and deadlines for any services that are due. If you are going to be frequently involved with contracts, hire an attorney to represent your interests.