Definition and Nature of Business Contracts
Definition of Business Contract
In simplest terms a business contract is a binding agreement. By one definition, "a business contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty." Contracts arise out of agreements; hence a contract is often defined as "an agreement creating an obligation."
Generally a business contract is an exchange of promises or assents by two or more persons, resulting in an obligation to do or to refrain from doing a particular act, which obligation is recognized or enforced by law. A contract may also be formed when a promise is made by one person in exchange for the act or the refraining from the doing of an act by another. The substance of the definition of a contract is that by mutual agreement or assent the parties create legally enforceable duties or obligations that did not exist before.
In order to be an enforceable contract, there must be an agreement between competent parties based upon the genuine assent of the parties, supported by consideration, made for a lawful object, and in the form required by law, if any.
Nature of Business Contracts
Contracts arise under a wide variety of circumstances. They may arise from face-to-face conversations or from conversations by telephone, from the exchange of letter or e-mails, or by several other means of communication.
When the contract is part of a common business transaction, a printed form is often used. In such a case of a business contract, all that is usually necessary to compete the contract is to add the date, the names of the parties, the price, the particular performance or commodity which is the subject matter of the contract, and the signatures of the parties. Familiar types of standard contract forms are insurance policies, leases, and the various forms used for the installment purchase of automobiles, appliances and flat screen televisions.
Sometimes the contract must comply with certain standards. One law may declare that a particular type of contract shall be in writing. Another law may prescribe the certain provisions must be included in the contract. Certain provisions of contracts may be prohibited entirely by law or may be declared contrary to public policy by the courts.
An essential part of free enterprise in our economic system is that the rights created by business contracts are protected. Each party must observe the terms of the contract, and generally government cannot impair the obligations of a contract.