Contracts and Agreements in Business
Contracts and agreements are fundamental legal documents that outline the rights, obligations, and responsibilities of parties involved in a business transaction or relationship. In the context of small companies, well-drafted contracts can help prevent misunderstandings, disputes, and legal issues.
In setting up your business venture as an entrepreneur, apart from registering your company with CAC there are other key things that needs to be in place for the smooth running of your business. One of such things is an agreement, either between you and your employee (appointment letter) or between you and your partners (Memorandum of Understanding) (MoU) or (Partnership Agreement) etc. This Contract or Agreement is very essential as it reduces or removes some frictions experienced by business owners without such agreement
You can either draft this Agreement yourself or engage the services of a Lawyer. In drafting this Agreement, there are basic ingredients that must be in the Agreement. Below are some key points to consider when drafting the contracts and agreements:
Essential Elements of a Contract
Offer: In drafting a contract there must be a clear proposal to enter into an agreement. There must be a clear offer, example in an appointment letter there must be an offer for employment and the employee is expected to accept.
Acceptance: The employer makes an offer while the response of the employee is the acceptance. This is the other party’s agreement to the terms of the offer.
Consideration: In drafting an agreement or a Contact there must be something of value exchanged between the parties (e.g., money, goods, services) that is what is referred to as the Consideration
Legal Purpose: The contract must be for a lawful purpose. Every contract entered into must be for a lawful purpose, anything other than that is an illegal contract and such cannot be enforced in the Court.
Capacity: Entering into a contract with a minor is illegal both parties must have the legal capacity to enter into the contract. In the eyes of the Law, anyone below the age of 18years is a minor and anything you are doing with such person be it business or work is illegal.
Mutual Consent: Both parties must fully understand and agree to the terms. Nobody should be coerced or pressured to enter into a contract with another. If the person you are dealing with is an illiterate the Law provides that an illiterate Jurat must be in place. The wordings of the contract must be interpreted to him or her and same must attest that he or she understood the contract before signing.
Other things to consider:
Clear and Specific Language: Contracts should be written in clear, unambiguous terms to avoid misinterpretation.
Parties’ Details: A Contract must clearly identify the parties involved, including names, addresses, and contact information. This is very essential in drafting a contract so that parties can be traced.
Terms and Conditions: The Terms and Conditions of a contact or Agreement must be expressly stated and not implied. The parties involved must specify the scope of the agreement, timelines, payment terms, deliverables, and any performance metrics.
Termination and Breach: Outline conditions under which the contract can be terminated and the consequences of breach. This is to avoid parties unilaterally breaching the Terms of Contract
Dispute Resolution: The provisions for resolving disputes must be included in a contract such as arbitration or mediation, to avoid costly litigation.
Governing Law: Indicate which jurisdiction’s laws will apply to the contract. Example if the parties are residing and doing business in Lagos, they cannot use the Law governing business in Rivers state. They can only use the Law governing business in Lagos State.
Amendments: Define the process for making changes to the contract, usually requiring written agreement from both parties.
Consulting a Lawyer: For complex contracts or agreements, it’s advisable to consult a lawyer with expertise in contract law. While templates can be helpful, ensure they are tailored to your specific needs and jurisdiction. To avoid unnecessary mistakes, it is advisable you seek Professional Assistance
Read also: How to Register a Limited Liability Partnership in Nigeria
One may ask, what are the types of Contracts and their uses? We have gathered a list of some contracts one can draft. If you need further assistance on how to draft any of it, please contact us. Below are some of the contracts, the list is exhaustive but just a few.
Types of Contracts:
Purchase Agreements: Outlines the terms of buying or selling goods or services.
Service Agreements: Specifies the terms of providing services to clients or customers.
Employment Contracts: Sets forth terms of employment, including roles, responsibilities, compensation, and benefits.
Non-Disclosure Agreements (NDAs): Protects sensitive information shared between parties.
Lease Agreements/Tenancy Agreement: Governs the rental of property or equipment.
Partnership or Joint Venture Agreements: Defines terms of collaboration between two or more parties or entities.
Licensing Agreements: Grants permission to use intellectual property, like software or trademarks.
In conclusion, remember that the specifics of contracts and agreements can vary greatly depending on the nature of the transaction and the applicable laws in your jurisdiction. Also maintain copies of all signed contracts and related correspondence. Regularly review contracts to ensure they are up to date and still relevant. Above all, Seeking legal advice and tailoring contracts to your business’s unique needs is crucial for mitigating legal risks.
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