Do you have an agreement with someone you’re buying from or selling to? Have you recently been employed? How would you be sure that the other party in your contract would stick to the terms stipulated in the document? Binding Contract Forms are used for such a scenario. A Binding Contract is a legally binding agreement between two or more parties, wherein if one party goes against the terms on the contract, he may be taken to court. Nowadays, every transaction requires a binding contract because a verbal agreement just isn’t enough and is almost impossible to prove in a court of law.
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What Makes a Contract Legally Binding?
A contract doesn’t have to be drafted by a lawyer for it to be legally binding, but it has to contain the following:
- All terms and conditions on the contract must be reasonable and agreed upon by both parties for the contract to be legally enforceable.
- There should be a statement of an exchange of things with value by both parties. Example is the sale of a house. One party would provide a house, and the other would provide a dollar amount in exchange for the house.
- The intent to keep their end of the contract should also be explicitly stated by both parties. This is to protect the interests of both parties.
- Both parties must be legally and mentally capable to enter a contract.
Every transaction and business relationship requires a contract. Buying a house? You would need a Real Estate Contract. Getting insurance for your car? Be sure to have an Insurance Contract. Got hired? Make sure you signed and procured a copy of your Employment Contract Form.
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Essential Provisions in a Binding Contract
These are not mandatory for a contract to be considered legally binding, but it can be very helpful if you have these clauses in your contract.
- Arbitration: A form of alternative dispute resolution (ADR) that allows both parties to resolve any disputes without having to result to litigation. This can save both time and money because court proceedings can be very expensive and time-consuming.
- Integration: This clause helps define the scope of the agreement. This states that only the terms and conditions on the contract are applicable and final. Previous conditions are not applicable and no additional terms may be supplemented.
- Force Majeure: This clause states that if any unforeseeable or uncontrollable event should occur that would make a party’s performance of the terms and conditions impractical, impossible, or illegal, then the contract may be terminated or suspended.
A Binding Contract’s objective is to enforce terms and conditions that would protect the interests of both or all parties entering into it. It should be reasonable and not one-sided so that the contract will hold up in court. There are also instances wherein you want to get out of a contract but not necessarily terminate it. For this type of scenario, you are going to need Contract Assignment Forms.
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