The business law attorneys at Calabrese Law Associates understand the importance of avoiding business disputes. They possess the expertise needed to help clients maintain and/or create a profitable business model. In business, clear and effective communication is critical to success and to avoid disputes.
Generations ago, business agreements were often simple verbal agreements (not reduced to writing). Even today some verbal contracts in Massachusetts are still considered valid and enforceable contracts in Boston and throughout Massachusetts, but this is a practice that modern business owners should avoid.
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What is Contract Law?
Contract law governs contractual relations between parties. A contract is a legally enforceable promise made voluntarily by a party to another to perform or refrain from performing a specified act in exchange for consideration. The arrangement creates mutual obligations that are enforceable by law, entitling the party to seek remedies when the other party breaches the agreement.
Individuals and businesses utilize contracts when transacting to create a set of terms that will govern and control a particular company dealing and protect their interests. Since the business agreement is what “controls” the deal, all parties to the agreement must understand its terms. Therefore, businesses in Boston and throughout Massachusetts should always require a valid and enforceable written contract to govern their business dealings.
When Is a Contract Considered Enforceable?
Under Massachusetts contract law statute, a valid and enforceable written contract is created when the following are present:
1. Offer
The first element in forming an enforceable contract is an “offer,” where a party suggests the terms of an agreement to another. In other words, one party offers to provide another with property, goods, or services. The terms of the offer should be sufficiently clear so that a reasonable person could understand and act on them.
Sometimes the person to whom an offer is being made may make another offer different from the one made to them. This is called a “counteroffer.” For example, James offers to sell a building to Joan for $150,000. Joan responds by offering $100,000 instead of the $150,000 James initially suggested. Joan’s proposed deal is a counteroffer, which James can accept or decline. A counteroffer amounts to a new offer and replaces the old one.
2. Acceptance
The other party must accept the offer or counteroffer made to them. In other words, the person to whom an offer is made must agree to the proposed terms, expressly or implied. For example, Joan may accept an offer expressly by sending an email, text, or by responding verbally. An implied acceptance may arise when Joan’s conduct demonstrates that she agrees to be bound by the terms. In either case, the acceptance must be unequivocal.
3. Consideration
Consideration is the legal term for a thing of value that the parties promise to exchange for the performance of the contract. It is the benefit that each party receives in exchange for what they give up in the contract, which may include the performance of an act such as the payment of money or a promise to refrain from doing a thing.
Now, let’s consider a classic example of two people creating a valid and enforceable contract:
James offers to sell Joan his business for the price of $200,000. Joan accepts James’s offer, and they both sign a written purchase agreement. Joan then pays John $200,000. Upon receiving Joan’s payment, James gives Joan ownership of his business.
In this example, James made the “offer,” and Joan “accepted” his offer. The “consideration” provided by Joan is her promise to pay James the $200,000 for the business. The “consideration” provided by James is his promise to give Joan his business after he receives payment.
James and Joan have entered into a valid contract to purchase John’s business.
Business Agreement Objectives
A properly prepared business agreement accomplishes five specific objectives that help avoid disputes and grow your business:
- A written agreement clearly communicates the subject matter and scope of the agreement to all contracting parties. This reduces the risk of confusion and disputes among the parties.
- A signed written agreement is evidence of the contracting parties accepting the deal. This reduces the risk of confusion and disputes among the parties.
- A signed written agreement is itself evidence of a consensus among the parties. This allows the parties to easily prove the existence of the contract and enforce that agreement should a dispute arise.
- In Massachusetts, certain agreements are void unless evidenced by a valid and enforceable signed written agreement. Eliminate this risk by always having a properly prepared written agreement in place.
- A properly prepared written agreement is essential to creating an efficient and profitable business model. In business, efficiency and profitability are byproducts of successfully performing one’s contractual obligations. Therefore, the clearer the agreement, the easier it is to identify the contractual obligations and make a profit.
Types of Business Contracts
Business contracts come in many forms, such as:
- Business partnership agreements: Partnerships are formed when two or more persons agree to carry on a business. The contract may govern several areas, including the day-to-day operations, the duties and rights of each party, profit and loss sharing, and the distribution of properties when the parties agree to dissolve the partnership. Each partnership is unique, so it is important to draft an agreement that reflects the true intentions and interests of the parties.
- Joint venture agreements: Joint venture contracts are purpose-driven agreements that allow legally independent businesses to launch common objectives, such as expanding their business offering or entering foreign markets. Unlike partnerships, joint ventures are generally temporary arrangements. The entities pool resources and responsibilities to execute a shared goal that may be challenging to perform independently. Joint venture agreements should cover each entity’s responsibilities, how decisions will be made, and plans for protecting both companies’ assets. It should also cover the process for terminating the joint venture.
- Agreement for the sale of goods: A sale of goods agreement is a legally binding contract that covers the terms for the supply and purchase of goods. The contract may contain several provisions, such as the goods being sold, the amount and payment plan, payment method, date of delivery, termination, and warranties.
- Agreement for purchasing or selling intellectual rights, franchises, products, and services: Intellectual property such as copyright, patent, trademarks, and trade secrets are valuable intangible assets for your business. An intellectual property contract protects those properties and shows the extent to which other persons, like franchisees, may use them. This agreement may also cover rights regarding leasing property and goods.
- Agreement for securing loans and financing: Businesses may secure a loan or enter into a financing agreement for various purposes, such as purchasing real property. These agreements formalize the loan or financing processes between the parties and detail the terms and repayment schedules. It is crucial to comply with all federal and state laws when executing such contracts.
How to Create a Business Contract
Although it’s possible to create a contract simply by writing a detailed agreement between two parties and signing it, negotiating and drawing up a contract can be complex. Both parties may not agree to specific terms and conditions or may want changes made before the contract is signed. It is vital to start working with a Boston, MA business contract attorney as soon as possible to help ensure your contract is valid and enforceable, which can give you an advantage when negotiating.
Speak With a Business Contract Lawyer in Boston Today
If you’d like to speak to a business contract attorney in Boston, MA, contact Calabrese Law Associates now for a free consultation. We have helped many businesses create successful and defendable contracts following Massachusetts contract law, and would be pleased to offer you advice and support as you enter your new business agreement.
This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.
While Calabrese Law Associates does offer legal help for landlord-tenant disputes, it is extremely rare that we take on these cases. Only about 1% of tenant-related cases and 10% of landlord-related cases will be considered by our law firm.
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