Contracts are an essential tool for any business in New Zealand. They make agreements between parties legally enforceable. This means that if one party breaks the agreement, the other party will be able to seek a remedy in court. Contracts also outline the rights and obligations of each party. If all the elements of a contract are satisfied, the contract is legally binding. This is why it is important you understand your contract and what the terms mean. This article will outline some questions you should ask yourself before signing any contract.
Examples of Contracts
There are many different types of contracts in business. In every business contract, the same questions should be considered before signing. The following table outlines some key business contracts you may enter.
|
Contract |
Definition |
|
Client Agreement | You will enter into this contract with your clients, and it will allow both parties to enforce the deal |
|
Supply Agreement |
This is agreed upon with your suppliers so that any goods you need are provided on time |
|
Employment Contract | An agreement of this sort outlines the rights and obligations of your employees |
|
Intellectual Property Contract | An IP contract protects any intellectual property you may create and licences other people to use it |
|
Loan Agreement | This agreement outlines the terms of your loan and the ways in which it can be paid back |
1. Is My Contract Legally Binding?
Before signing a contract, a careful businessperson questions whether it is legally binding. For a contract to legally bind parties, it needs to have all the elements of a legally enforceable contract. These elements are listed and explained in the table below.
|
An Offer |
A statement of terms in which the offeror is willing to be bound |
|
Valid Acceptance |
Agreement of those terms by the other party |
|
Adequate Consideration |
One party must benefit, and one party must face a detriment from the contract |
|
Intention |
There needs to be an intention to enter into a binding contract from both parties |
|
Certainty | The contract needs to have certain terms, meaning there cannot be any ambiguity in the clauses |
All of these elements are needed for a contract to be binding. If parties do meet one of these elements, then the contract can be deemed unenforceable, and you may not be able to get compensation if your contracting party breaches the contract.
Continue reading this article below the form2. What Are My Obligations?
An obligation is something that you have to do as part of the contract. Usually, it is something that detriments you. For example, you may have to pay money to somebody else. You must know exactly what your obligations are under a contract as you will be bound to follow them. If you do not uphold your obligations, you may be in breach of contract and be liable to court proceedings.
3. What Are My Rights?
A right is something of benefit that comes out of a contract. It is usually something you receive, such as a product. However, a right can also be a monetary amount. Indeed, you must be aware of your rights as you do not want the contracting party to take advantage of you. For example, if you are unaware of your rights, your contracting party may not provide you with a good of the same quality that was initially agreed upon.
4. How Do I Terminate the Contract?
Another question that you should ask is how parties can terminate the contract. For example, you may want to terminate your contract if your contracting partner breaches the contract. Instead of going to court, you may feel it is easier for you to terminate the contract. You may also want to terminate the contract if you cannot uphold your obligations under the contract.
You can also check to see if you can transfer your contract to another person. This means that your contracting partner still has a contract with someone else, and you can get out of the contract.
However, you should be aware that your contracting party is also able to use the termination clause. This means that if you breach the contract, the contracting party can cancel the contract.
Key Takeaways
Entering into binding contracts means that you can underpin your agreements with legally enforceable contracts. It is important before you enter into a contract that you ask a few questions about it. Firstly, examine the contents of the contract, whether the terms are enforceable, and how they might affect you. It is vital to remember that a contract is not enforceable unless it has all the elements of a binding contract. You should also know your rights and obligations, including whether you can terminate the contract if you need to.
If you need any legal assistance with contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.
Frequently Asked Questions
Yes, the method of acceptance depends on what each party says in the contract.
Yes, an ambiguous term can make a contract unenforceable. This is why it is a good idea to get a lawyer to draft up a contract.
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