Business Start up Information: Understanding Contractual Agreements

One of the most important kinds of business start-up information that an entrepreneur can receive is information about contractual agreements. Any business relationship you have in which you exchange payment for goods or services has an oral, written or implied contract. If you want to protect your business and your personal assets, it's important to use written contracts in which the terms are explicitly stated.

Required Written Contracts

Some contracts won't be enforced by a judge unless they are in writing. State laws define which contracts must be in writing, but the usual ones involve these factors:

  • the transfer of land
  • terms that are longer than one year
  • payment for goods that is more than $500

It’s important to get all the contracts you need for your start-up business. Information on which contracts to use can be obtained by your small business attorney or by researching standard contracts used in your industry.

Laws that Govern Contracts

Common law or the Uniform Commercial Code (UCC) governs contract law. The latter is used to govern contracts that pertain to the sale of goods. However, not all states have adopted the UCC, either in whole or in part.

Lawsuits are commonly used for resolving contract disputes, but they are not the only option. Arbitration and mediation are much cheaper options for a start-up, and information on these methods can be found at www.adr.org.

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