Good Business Practices Part 1 – Contracts

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This is the first in a series focused on good business practices for small businesses, entrepreneurs, artists and professionals, as well as the customers doing business with them. In this part, we’re going to look at the importance of contracts.
Primarily, contracts are used in business situations, but they can be used in personal situations as well. They must adhere to the laws of the state or country in order to be binding.

Small businesses and service providers should definitely use contracts for all their business transactions. A contract protects both you and your customer and helps to ensure everyone plays fair and acts in a professional manner.

What should be in a contract?

All the Facts – No seriously. Every single detail should be in the contract. The contract should detail what the client is getting in exchange for payment. All the names of the parties should be in the contract. Delivery dates, payment plans. Everything. Nothing is too big or too small.

Fixed Cost – A business transaction usually involves the exchange of goods or services for cash. By agreeing to the cost for the goods or services and having them in the contract, neither party can change it, regardless of change in the market price. If either party refuses to complete the transaction at the agreed cost, the contract allows for legal recourse and protects to both parties.

The Signature – The signature is important because it binds the parties to the agreement and makes it enforceable by law. Verbal contracts were very common in the past. However, in recent years they have become less acceptable. By having a contract stating all the details and cost of the agreement, once signed by both parties, it becomes legally binding. In today’s world, digital signatures are also acceptable. This offers protection to both the business and the customer and allows either party to take legal action if the other doesn’t hold up their end of the deal.

Always Read Before Signing

As important as a contract is to protect you, signing one without reading it is just as bad, if not worse, than having none at all. Ensure to read it fully. If there is something you aren’t clear on or don’t understand, ask that it be clarified. If you still have doubts have a lawyer take a look. In most cases, you should have a lawyer review it anyway.
Be wary of any business or client who doesn’t want to sign a contract or some form of written agreement. It should be a warning sign of things to come in the future. None of them good. Legitimate clients and businesses should have no problem signing an agreement that protects both parties. It’s a sign that they are willing to operate in good faith.

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