In the realm of business and personal relationships, contracts play a crucial role in defining and formalizing agreements between two or more parties. Although many of us encounter them daily, from purchasing a product to hiring a service, understanding what a contract is and how it functions goes beyond simply signing a document.
A contract is not just a piece of paper: it is the foundation upon which trust-based relationships are built and a clear framework of obligations and rights is established between the involved parties. At Markowicz International Law, we work with commercial contracts across various sectors. What key elements should not be missed? How can conflicts be avoided? Let’s explore.
What is a contract?
A contract is an agreement between two parties, in which one party performs an action in exchange for a consideration that is to be granted by the other party.
Our life is full of contracts: every time we buy or sell something, or when we offer a service of any kind, we are always agreeing upon something between two parties. A contract is an essential tool for a common agreement between parties.
Contract characteristics
Contracts can be oral or written.
In the case of a verbal contract, at some point the problem of the word of one against the other may arise, or over time they might forget about some agreed upon clause.
So that there are no doubts about what is stipulated, and to make sure it can be fulfilled in a timely manner, it is always better that a contract be established in writing, since it is a more formal agreement.
The agreements that were previously agreed upon are apparent, and there are no later doubts about the descriptions and terms set by both parties. A qualified lawyer notes the requirements and offers of both parties and ensures that there are no omissions of any kind.
In addition, everything is duly established and misunderstandings are avoided, since the contract can be accessed at any time to clear doubts. In general, we can say that a duly drafted contract guarantees us three items:
- Which parties are involved in the contract
- The way of proceeding between the parties
- The payment for said service
Types of Contracts
Contracts are essential tools in legal and commercial contexts and can be classified into different types based on their characteristics and objectives. Understanding the different types of contracts and their specifics is crucial to ensure each agreement meets the needs and expectations of the involved parties. Here are the main types of contracts: unilateral and bilateral, labor, commercial, and service contracts.
A unilateral contract is one where only one party assumes obligations or commitments, while the other party does not have specific responsibilities under the agreement. In other words, only one party agrees to perform an action or deliver a good, while the other party is not obligated to do anything in particular.
A donation contract is unilateral if one party donates a good or money without expecting any consideration from the recipient. The donor is obligated to deliver the good, but the recipient has no obligation towards the donor.
On the other hand, a bilateral contract involves both parties having obligations and responsibilities. Each party agrees to perform an action or deliver something in exchange for a consideration that the other party must provide. Bilateral contracts are the most common in commercial and personal transactions, as both parties are actively involved in the agreement.
Labor contracts are specific agreements that regulate the relationship between employers and employees. These contracts establish the rights and duties of both parties and define the conditions under which work will be carried out.
They must detail the job position, the duration of the contract (whether temporary or indefinite), the salary, working hours, and any other relevant conditions, such as probationary periods or confidentiality clauses.
Commercial contracts regulate transactions between businesses or between businesses and individuals. These contracts are essential to ensure that purchases, sales, and other transactions are conducted orderly and according to the agreed terms.
They establish the terms under which a good or service will be sold and purchased. They should include details such as the price, the description of the good or service, delivery conditions, and the guarantees offered.
Service contracts are used to regulate the provision of professional services between one party offering the service and another requesting it. These contracts are common in sectors like consulting, advising, and other professional services.
In services involving sensitive information, confidentiality clauses may be included to protect data and prevent unauthorized sharing.
Advantages and benefits of a written contract
These contracts have a detailed description of the product or service provided. The obligations and responsibilities of the parties that agree on the document are also detailed.
They can avoid later claims, and if there is any doubt, it is possible to access the document in order to clear the issue up. In case there is any discrepancy, since everything is documented, the legal terms are streamlined.
The work of a lawyer at all times is essential, from the creation of the document, to the moment of signing it. And let’s not forget about it while developing compliance with it, since lawyers know which clauses to use to avoid situations that can lead us to Justice. This way, the process is faster and easier.
Requirements of a contract
- There are basic elements that a commercial contract must contain. When it is written by a business lawyer, the security of knowing the current legislation on the matter is guaranteed.
- Full details of the parties: Names of the companies and/or representatives and their addresses, as well as the details of who legally represents them.
- The reason or service for which the contract is signed. Indication of the duration time, beginning and end, of said contract.
- The conditions under which the parties agree to the contract, the obligations and responsibilities of both parties, the consequences in case of non-compliance.
- The form of payment, detailing the total cost, manner and terms of payment. It is important not to omit details of the corresponding taxes, if applicable.
Before signing the common agreement, both parties must read and reread everything written and agreed upon in the contract, while continuing to analyze each clause.
If it is necessary to go back to the lawyer to clear up doubts on anything that was written, (if it is still possible to make an amendment), the parties should specifically clarify the legal terms and details of what is written in “fine print.”
Invalidity and Nullity
Invalidity occurs when a part of the contract does not meet the legal requirements necessary for its validity, which may lead to that part being considered invalid. Causes of invalidity can include lack of legal capacity of the parties, lack of genuine consent, or illegality of the contract’s subject matter.
If a clause of the contract is invalid, it does not necessarily invalidate the entire contract. Depending on the jurisdiction and the nature of the clause, the rest of the contract may still be valid and enforceable. In some cases, it may be necessary to amend the contract to correct the invalid clause and ensure it meets legal requirements.
Nullity refers to a situation where a contract or part of it is considered null and void from the outset. This can occur if the contract is illegal or if it was made without fulfilling all essential legal requirements.
A null contract is considered never to have had legal effects. The parties generally must return anything exchanged under the null contract. If part of the contract is null, it may be necessary to review the rest of the agreement to determine if it remains valid or if the entire contract should be considered null.
Business Law Miami for your contracts
Every business relationship must be formalized to avoid future headaches. A written contract always sets forth all the agreed upon terms and conditions.
These provide security and clarity in the contract to be signed, since the rights and obligations of each of the parties will be known. The business lawyer in Miami will provide a guarantee that the terms are written in such a way that any type of inconvenience in the future will be avoided.