Contract Law: How to Protect Your Business
All small business owners need to have a basic understanding of contract law, since it’s one of the cornerstones upon which business transactions are conducted. An understanding of contract law will help you to protect your business whenever you have interactions with employees, contractors, other businesses, and even government agencies. Here are some of the most important terms you should be familiar with.
As it relates to contract law, ‘consideration’ refers to any items being exchanged for either services or goods, and this usually means money. You’ll come across this term quite often in contracts arranged between two businesses, or between one business and an individual.
This is one of the most common and one of the most significant terms in all of contract law. Since it constitutes agreement between two parties of the terms and conditions of a contract, the two parties are said to be in a state of acceptance of those contract terms. Up until the moment there is acceptance between parties of any contract, either party has the right to reject terms and withdraw unilaterally from the agreement. After acceptance however, all terms become legally binding.
If this sounds familiar, it may be because you’ve heard it in connection with trade unions and employees, since it describes the agreements made between those two parties. It can also refer to agreements made between two employees, although that is far less common. Although referred to often in contract law, it is actually governed by employment law.
This term refers to the evaluation of all bids submitted to a contractor for work, and analyzing which of those bids will provide the greatest value to the contracting company. Generally a scoring process is used to rank the bids, so that the winner can be quantitatively selected.
When both parties to a contract are thought to be fully able to understand the consequences of their contractual agreements, they are said to be capable parties.