Business conducted either locally or internationally should be carried out under a proper legal contract otherwise it is
a risky practice and at any time any dispute may arise and both parties may face severe damages.
Business
contract forms state the purpose of the agreement between any parties involved. They describe the specific performance that each party is obligated to do. This prevents any misrepresentation in the future and interprets what is expected from any party involved in the contract. To describe above - let''s discuss the essentials of a business contract as under:
Date/Time: Contract must mention date and time on which contract is signed between the two parties.
Parties identification: Contract must mention the details of parties e.g. their name, address, location of head office etc.
Reference: Parties are referred to as a single word used to describe their role throughput the contract such as "Principal" or "Seller" or "Vendor" and other party as "Agent", or "buyer" or "Customer" etc.
Territory: Contract must mention the territory wherein contract/agreement is to be executed.
Products: Contract must mention product(s), their specification, packaging, prices and delivery terms & conditions so that supplier must know what they have to supply under the contract and buyer must know for what products they have entered into a contract. If samples are required - it should be clearly mentioned who will bear its cost/delivery expenses.
Mode of Transportation: It should be mentioned as well i.e. by air, by sea or by road etc.
Price Term: US$/unit (within country), or US$/unit C&F (Destination Port) or F.O.B. (Destination Port). If price is F.O.B then Supplier prefers F.O.B. (Loading Port) and freight of the consignment is on buyer account and buyer gets his consignment cleared after paying duties, port charges, taxes and freight to shipping company. Normally suppliers avoid paying freight to shipping company at the time of loading because they have to pay freight in advance to that shipping company whereas they have not received payment from buyer or his shipping
documents are not negotiated by customer in bank. Further, they are also at risk for discrepant documents claimed by buyer if customer''s L/C opening bank mentions any discrepancy in documents and buyer refuses to accept that shipping documents hence supplier''s payment is jeopardized.
Payment Terms: i.e. Cash or credit (duration should be mentioned) or through Letter of Credit.
Documentations: What documentations are required i.e. Copies of Original Invoices, Packing List, and Product Description Certificate, Bill of Lading or Airway Bill or any other specific documents following the nature of product.
Seller and Buyer may also agree to include a term regarding breach of contract and may mention remedy for any mistake from either side. But in case of interpretation of such term or other terms of the agreement legal action may also be taken against the party but country of hearing and law of country must be mentioned in agreement which in most of the cases is Principal''s country.
Finally, signature of authorized personalities of both sides and their witnesses are a compulsory part of business contract. In fact, a contract is any promise or set of promises made by one party to another for the breach of which the law provides a remedy. The promise or promises may be expressed (either written or oral) or may be implied from circumstances. Typically, the remedy for breach of contract is an award of money damages intended to restore the injured party to the economic position that he or she expected from performance of the promise or promises (known as an "expectation measure" of damages). Occasionally a court will order a party to perform his or her promise (an order of "specific performance" or "quantum meruit"), but this remedy il. In the civil law, contracts are considered to be part of the general law of obligations. All terms of the contract must be lawful. Neither party, for example, can be required to break the law to meet the terms of the contract.
Both parties must be legally capable of making the contract. That is, they must be legally sane and, usually, over 18. They must also freely give their consent. If it happens that both parties consented by mistake, either party may cancel the contract; if one party''s consent was obtained through fraud that party may cancel. A party may also cancel if he or she signed the contract under duress (threat of harm or actual physical harm) or undue influence (that is, the party did not freely exercise his or her own free will as a result of another person''s influence).
Generally, the contract must be supported by consideration (what you and the other party exchange in the bargain). This exchange, though, does not have to be equal. For example, if you agree to pay $500 for an item that is, in fact, worth $20, you will generally be held to your agreement. However, if you sign a contract to purchase a product and that product proves to be defective or something other than what the contract says it is, you can probably cancel the contract.