WHY ARE LEGAL AGREEMENTS AND DOCUMENTS SO CRITICAL??

In today's world, there is no way to avoid dealing with contracts, legal agreements, documents, and other legal instruments on a regular basis, especially if you are a coach, consultant speaker, writer or expert/influencer and you are seeking short- as well as long-term success. Since there is a common need to reduce terms to writing to formalize a commitment or agreement between two or more individuals or businesses, a chief concern is legal enforceability, such that if or when any of the parties defaults or fails to comply with its terms and conditions, appropriate legal sanctions can be applied. A primary consideration is the cost of reducing the relevant terms and conditions to writing, and to doing so correctly so that the resulting document has weight and credibility. We strongly recommend AGAINST deciding to create an agreement without proper legal counsel; DO NOT use a legal form or template that you find online; ALWAYS hire or at least consult with a BUSINESS LAWYER (not just any lawyer that you happen to know) – otherwise you will end up in more trouble than you bargained for, want, or certainly need! STAY IN YOUR LANE!!!!!

What Is a Legal Document or Agreement?

A legal contract is a universal document which many individuals and businesses enter into every single day. A contract has 3 essential elements – offer, acceptance and consideration. Consideration is the commodity being exchanged such as fees paid for products or services delivered. According to the Legal Information Institute, a contract is “An agreement between parties creating mutual obligations enforceable by law.” Sometimes it is challenging to know whether you've entered into a legal contract or not, which is but one of th plethora of reasons that seeking legal guidance is so important. Again, STAY IN YOUR LANE!!

The Key Elements of a Valid Contract

Offer: An offer is the first element of a contract. It is essential that the offer is very clear, detailed, and easy to understand. If, for example, you are selling a business, the proposal in the Sale of Business Agreement will need to include the exact parts of the business that you're selling (goodwill, plant, and equipment, etc.). A vague offer is not an offer!

Acceptance: For for a contract to be valid and binding, the offer needs to be accepted! If you propose to sell your business and make an offer to a prospective buyer, (s)he will need to accept that offer unambiguouslyfor a contract to exist (writing is recommended to avoid ambiguity).

Consideration: The next step is to check whether there is a consideration. The parties must be entering the contract for valid reasons. Often, this is cash, but consideration can also come in the form of an action or exchange, or an agreement notto complete an action. A good example would be swapping a rake for a broom. You may not be exchanging cash, but you're receiving consideration in the form of the rake or the broom. Furthermore, you could agree with another party not to disclose certain confidential information if the other party does likewise (eg: signing a Non-Disclosure/Confidentiality Agreement), and in this case, the consideration is an undertaking notto take a specific action.

Legal Relationships

The next step is to make sure that there is a clear intention to create a legal relationship between the parties. Generally, if you have agreed to the terms of the contract and both signed it (in some form), it is considered pretty clear that there is an intention to create a legal relationship between the parties. Contracts are not always written, though (although we always recommend reducing any agreement to writing!!!). If you enter into an oral agreement with someone, it can be difficult to work out whether there is indeed an intention to create a legal relationship, so oral contracts should be avoided as much as possible.

Competent

The parties to a contract need to be competent. This means that if either party is severely mentally or physically disabled, or not an adult (18 years of age in most jurisdisctions), that party will probably not be competent to enter into a contract and any contract involving such a party would be void or voidable (whether a contract is void or voidable is confusing and legal counsel should be sought).

Why Are Legal Documents and Agreements Important?

The complexity of modern business contracts, coupled with legal procedures, business regulations, disputes, and possible litigation, has made it more advisable than ever for businesses of all sizes and individuals alike to have their contracts in writing and to seek competent legal advice in drafting same.

Details

As noted, valid contracts consist of an offer, an acceptance of the offer, and consideration -- which means remuneration with conditions -- for the work performed, or for the services or products provided. These agreements aim to ensure that the parties understand the details of the business agreements into which they are entering. The parties generally are more serious about their actions and goals and work out the precise details of their venture, including their obligations, payments, warranties, services, earnings, and penalties for non-performance, once reduced to writing.

Confidentiality

Confidentiality and Non-Disclosure Agreements (commonly known as NDA’s) are often a preliminary and uber critical component of the business contract process between prospective partners on any level. NDA’s bind the parties to hold market-sensitive, technical, proprietary and commercial information in strict confidentiality within the transactions that affect the parties and the negotiation process. There is generally a fixed duration for these confidentiality agreements stipulated within the document, although confidentiality often endures beyond said duration. The disclosure of confidential information by one party can lead to a claim of breach of contract by the other party or parties.

Disputes

Disputes and disagreements can – and unfortunately do - arise in many business ventures. A valid business Agreement should include a special section devoted to the treatment of breaches and conflicts, providing for their resolution where possible, and perhaps including reference to agreed-upon mediation or arbitration. If a contract stipulates detailed mediation and arbitration procedures, the parties may be able to avoid the expensive litigation costs in which a severe disagreement could otherwise result.

Other Considerations

It's also important to keep in mind that there are different types of contracts. A contract can be oral or written. Unfortunately, the courts are full of parties who agreed to oral contracts [1]- when they fall out; it is tough to work out who agreed to what! Get it in writing (and don’t forget –email exchanges are considered “written”).

Last, but certainly not least, you should always keep an eye out for implied contracts. For example, if you do something as simple as ordering a takeaway coffee, you are entering into an implied contract[2]- it is suggested that you'll pay for the coffee once the barista has made it. These types of implied contracts occur hour by hour and day by day and so many of us are simply unaware of their implications…so don’t enter into an implied contract unless you are aware of your obligations!

Lauren Cohen is an internationally-acclaimed attorney, advisor and business strategist. Lauren designed ScaleUPCheckUP™to serve as the GPS for business owners such as coaches, consultants, speakers, authors or experts/influencers. Our3-Step ScaleUPCheckUP™Success System (Assess/Diagnose/Deliver) assesses your business's risk in the 7 most critical areas that, if ignored, could lead to disaster. Contact the ScaleUPCheckUP™team at [email protected] 1-866-724-0085.

ScaleUPCheckUP™’s blog, website, newsletter and other forms of communication contain general information about legal and related matters. The information is not legal, financial, or investment advice and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.

[1]According to Black’s Law Dictionary (online), an oral contract is a contract agreed to verbally, but not in writing, the existence of which can be difficult to prove as a result. If an oral contract can be proven to exist, it may void a written contract and vice versa.

[2]According to Investopedia.com, an implied contract “is a legally-binding obligation that derives from the actions, conduct, or circumstances of one or more parties in an agreement. It is assumed to exist, and no written or verbal confirmation is necessary.”