All the Basics You Should Know About Business Contracts.

posted byBagasian LawDecember 9, 2020

Business contracts are essential for protecting yourself and your business from possible disputes. By outlining an agreement between two parties, business contracts ensure these parties are accountable for their obligations.

In this article, we will be discussing:

The Different Types of Business Contracts

There are multiple types of business contracts, each applicable in different business situations. They include:

Business Setup Contracts- This type of contract is agreed upon by co-founders of a company, business partners, and investors. It ensures that every member of a founding team is on the same page and that equity and responsibility are allocated and understood by all parties. Business setup contracts are especially important for small companies and startups.

Business Acquisition and Sale Contracts- This type of contract is created when a merger or acquisition is taking place, meaning a business is buying or merging with another business. A Business Acquisition or Sale Contract will initiate the transfer of a business and outline what is and is not included in the sale, and outlines the warranties that come with the sale.

Commercial Real Estate Contracts- This type of contract facilitates your commercial real estate transactions, which are often a crucial part of running or starting a business. Whether it is a lease agreement or an agreement with a vendor, a business contract will ensure the transaction runs smoothly.

Business Transactions Contracts- This type of contract outlines rules and obligations for business transactions, helping establish a strong relationship with your customers, vendors, and suppliers.

The Important Elements of a Business Contract

When drafting or reviewing a contract for your business, it is important to know what elements in a contract to look for and scrutinize.

First, the contract must outline an offer, such as an offer of employment or a non-disclosure agreement, for example. Then the two parties must agree on these terms and accept them.

In the same regard, a business contract that is enforceable by law must have been agreed upon with mutual consent. This means that both parties fully accepted the offer outlined in the contract without any force or coercion.

Additionally, for the contract to be valid, both parties must be “competent,” meaning that they must fully understand what they are agreeing to. For example, a person can be deemed incompetent if they are a minor or are under the influence of drugs or alcohol.

The next element of a business contract is called the consideration, which is often synonymous with the agreement. However, it outlines what each party is subject to or obligated to do once the contract is agreed upon.

And finally, the contract must be an agreement that in and of itself is legal. In other words, if a contract outlines illegal activity, it does not hold up as enforceable in court.

How to Know if A Contract is Enforceable

A contract may be drafted and have clear provisions, however, there are certain requirements for the contract to be viable in court .

For example, two businessmen could make a verbal contract. However, if a dispute arises, this verbal contract cannot always be legally enforced.

While verbal contracts can be disputed in a court of law, to protect yourself and your business, that contract should be in writing. For example, a judge will more easily be able to determine if a breach of contract occurred.

In the same regard, a contract, by definition, must be enforceable to hold up in court. Otherwise, we would define it as an agreement that lays out mutual obligations but is not necessarily enforceable.

How to Know if Your Contract Has Been Breached

A breach of contract is when either party bound by a contract does not fulfill the obligations outlined in that contract.

Depending on the severity of the situation, the breach can be categorized as material or immaterial.

A material breach is when the breach of contract results in damages that the party has a right to recover if a lawsuit is filed in court.

On the other hand, an immaterial breach still means the obligations of the contract were not met. However, neither party suffered as a consequence of this breach.

Litigation is not the only solution for resolving business contract disputes. Rather, a business or parties involved can choose to employ a third-party mediator to resolve the dispute.

A breach of contract can be remedied through payment by the breaching party for the damages incurred, a cancellation of the contract, or restitution.


Business contracts are foundational for any business at any stage of their growth. In addition to providing legal protection, business contracts can improve accountability and productivity internally.

Hiring legal representation ensures that your business contract is legally enforceable and ensures that you will get the necessary compensation if a breach of contract occurs. An experienced business attorney will also help with drafting contracts and ensure the success and safety of your business.

Los Angeles-based lawyer, Alina Bagasian , will provide the best legal services for your business. Possessing an understanding of corporate and commercial business, Alina Bagasian is ready to represent your business and provide you with excellent legal advice.

The Law Offices of Alina Bagasian have achieved 100% client satisfaction, providing clients with unlimited advice, and offering eight different services. Get the help you need today!

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