Adi Said

Why can’t you afford to be ignorant about contracts if you own a business? Contracts are so important in our lives. Every day, you make many oral contracts without paying attention. Each day, you probably enter into at least a contract, whether it is for groceries or other stuff. They become more crucial when it comes to business. You cannot imagine having a business without contracts. You can establish any business without employees, but not without entering into contracts. For instance, Lip wants to open a doughnut shop because he is pretty good at cooking doughnuts. He meets his friend Nicole and discusses this idea with him. Nicole says to Lip it sounds good; since she is a seller of sugar as well as wheat, he should not worry about the supplies. Lip says to Nicole: send me one packet of each on Monday. Okay, says Nicole. Did Lip and Nicole enter into a contract? So let us get into it! DEFINITION OF A CONTRACT It is an agreement between the parties that is enforceable by a court of law. a. Agreement When a party agrees to do something for another party, it is called an agreement. For example, Lip agrees to paint Nicole’s house, and in exchange, Nicole decides to pay Lip for his services. b. Enforceable This phrase is so much important. It means a party has a remedy against a party to the contract who refuses to perform its duties under the contract. An aggrieved party approaches the proper forum, usually a court of law, to get damages because the other party refuses to perform its duties under the contract. In other words, Lip agrees to paint Nicole’s house, and in exchange, Nicole decides to pay Lip for his services. As a result, Lip paints Nicole’s house, but she refuses to pay Lip for his services. Lip, as the victim, can approach a court of law for a remedy and enforce this contract against Nicole. c. Parties There are two kinds of parties under a contract: 1. Offeror The person who makes the offer is an offeror. For example, Lip says to Nicole, “I want to paint your house.” Lip made an offer to Nicole. 2. Offeree The person who receives the offer is called the offeree. For example, Lip says to Nicole, “I want to paint your house.” Nicole is receiving the following offer made by Lip, which makes him an offeree. She has the power to accept or reject. TYPES OF CONTRACTS There are three types of contracts: I. Valid contracts Everyone intends to form this type of contract because they are enforceable. The court of law provides a remedy if you enter into a valid contract. II. Voidable contracts These contracts are usually enforceable by one party to the contract. Only one party has the power to enforce it or not. III. Void contracts No one wants to form this kind of contract because it does not include any remedies. They do not have any value in a court of law; if you go to a court of law with void contracts, you would not be able to seek any remedy. They are unenforceable. THE IMPORTANCE OF CONTRACTS IN ANY BUSINESS We have seen the types of contracts. As a business owner, it is crucial for you to always enter into a valid contract. If you do not form a valid contract, you will be unable to enforce it in a court of law and obtain a remedy. As a result, your business will suffer a loss. So you must always enter into a valid contract. We all remember how Mr. Musk offered to buy Twitter for $44 billion in April. Twitter accepted his offer and decided to proceed with the contract. However, in July, he decided he no longer wanted to proceed with the deal. As a result, Twitter sued him for breach of contract and asked the court to make him comply with the contractual obligations. Finally, Mr. Musk decided to proceed with the deal, ending all possibilities of potential legal liabilities. If it was not a valid contract, Twitter could not sue Mr. Musk, and it could cost Twitter billions of dollars in losses. CONCLUSION Everyone should have a basic knowledge of contracts because it is impossible to ignore them. But if you are an entrepreneur, you must know about forming a valid contract because it is always good to reduce the risk of legal liability for your business.