Contracts are important legal documents used in many stages of life. Individuals and businesses may use contracts for employment, the sale of goods, advertising, software licensing purposes and to set up a franchise.
Due to their broad reach, it is likely everyone will face a contract at some point in their adult lives. As a result, it is beneficial to know the basics of how the contract process works.
Step 1: Preparation of the contract documents
The provisions within the document will vary depending on the document’s goal. An employment contract, for instance, will likely include provisions outlining the employee’s salary, benefits and start date as well as a confidentiality agreement and potentially a non-compete clause. In contrast, a contract used for the sale of goods will likely include provisions to address failure or default from either party as well as addressing any unforeseen circumstances that may prevent completion of the sale.
Although boiler plate or fill-in-the-blank documents are available, they are not always wise. What they save in time at the beginning of the contract process is unlikely to make up for the expense, frustration and potential courtroom battles that can result in the event of a dispute. Those who are in need of a contract can mitigate these risks by having the document drafted for their specific purposes.
Step 2: Execution of the contract
Once negotiations are complete and a final contract is prepared, the document is executed. This process generally entails both parties signing the finalized document.
Step 3: Revisions
Contracts generally evolve to meet the changing needs of the parties. As a result, amendments and revisions are not uncommon. It is important to properly track and record any changes to better ensure successful enforcement if necessary.