LucidTrac Blog

Contracts: Why You Need Them and What Happens If You Don't Have Them

written by Victor Ocasio / [email protected] on Wednesday 11/23/2022
updated on Sunday 04/14/2024 14:21 UTC

We've all been there. You're about to close a deal with a new client and you think, "Do I really need a contract for this?" After all, it's just a small project, right? WRONG. Whether you're working with a local business or a multinational corporation, any time you provide goods or services in exchange for compensation, you need a contract; and here are my reasons why:

LucidTrac ERP - Contacts

They Protect Your Interests

A contract is essentially a legally binding agreement between two parties. That means that if one party doesn't hold up their end of the bargain, the other party can take legal action to enforce the contract. 

For example, let's say you own a graphic design business and you've agreed to design a website for one of your clients. The contract stipulates that you will be paid $5,000 for your work. But when the project is completed, the client only pays you $3,000. Without a contract, you would have no legal recourse to get the rest of the money you're owed. But if you do have a contract, you can take the client to court to enforce the terms of the agreement. 

 

They Set Expectations

A well-written contract will spell out exactly what is expected of both parties involved in the agreement. This includes everything from deadlines and payment terms to scope of work and deliverables. This helps to avoid misunderstandings down the road and sets clear expectations from the start. 

For example, let's say you're hiring a web developer to build a new website for your business. In the contract, you could include provisions that outline exactly what type of website you want, how many pages it should have, what functionality it should include, etc. This way, there are no surprises and both parties know exactly what is expected of them. 

 

They Help Avoid Disputes

Unfortunately, not every business relationship goes smoothly. There may be times when disagreements or misunderstandings arise. Having a clear, legally binding contract in place can help resolve these disputes quickly and efficiently. 

For example, let's say you hire an SEO consultant to help improve your website's search engine ranking. After six months of work, your website's rank has improved slightly but not nearly as much as you were expecting given the monthly fee you're paying. When you bring this up with the consultant, they claim that they fulfilled their obligations as outlined in the contract and that it's not their fault your website isn't ranking higher.  Without a contract, it would be very difficult (if not impossible) to prove that the consultant didn't fulfill their obligations.

But if you have a detailed contract that outlines exactly what they were supposed to do (e.g., increase your website's rank by X percent within Y months), then it's much easier to resolve the dispute in your favor. Essentially, having a well-written contract protects both parties involved in any type of business agreement and helps avoid costly disputes down the road. So before you start any type of business relationship no matter how big or small be sure to have a solid contract in place first! 


What to Include in most standard Contracts


Now that we've established that contracts are important, let's talk about what should be included in them. Every contract is different, but there are some key elements that every good contract should have, including: 

  • An offer and acceptance: This spells out what exactly is being offered and accepted by both parties. 
  • Consideration: This is what each party is getting out of the deal. For example, the freelancer gets paid while the client gets their article written. 
  • Compensation: This section establishes how and when the freelancer will be paid. 
  • Termination: This details under what circumstances either party can back out of the deal without penalty. 
  • Signatures: Don't forget to have both parties sign the contract! Otherwise, it's not legally binding. 
     

In Conclusion:

A contract is an legally binding agreement between two parties that outlines expectations, sets clear boundaries, and protects both sides from future disputes. Whether you're working with a local business or a multinational corporation any time you provide goods or services in exchange for compensation you need a contractual agreement in place! 

A well-crafted contract is essential for any business transaction, big or small. Contracts protect both parties in the event that something goes wrong by spelling out the terms of the agreement between them. When creating a contract, be sure to include key elements such as an offer and acceptance, consideration, compensation, termination, and signatures from both parties. By taking these precautions, you can avoid potential legal issues down the road.

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