A Brief Introduction About the Legal Agreement
How to make a legal Agreement?
To make a legal contract, there are 4 aspects to be covered:
- Offer by one party
- Acceptance by another party or parties
- Payment of a consideration
- Mutuality of obligation
You can draft a legal agreement by referring to a legal contract template online.
Legal documents are required in a variety of situations, from marriage or divorce to renting out a property or setting up a business.
Legal forms are available for all types of agreements, and you can download the same online. Once the data is entered into the ways and notarized by the concerned authority, it becomes a legal agreement.
Legal contracts are enforceable in a court of law and are entered into by private parties, which results in mutual obligations.
Legal detriment arises when a party to an agreement performs an act they are not under a legal obligation to perform or refrain from accomplishing something that they have a right to do.
Legal terms list: This list comprises legal jargon used while drafting the agreement, and you can find the commonly used legal terms here.
Who Takes the Legal Agreement? – People Involved
A legal agreement is a legally binding contract entered into by two or more parties.
When two or more parties want to enter into a formal relationship, they need a legal agreement to ensure that they are protected by law if one of the parties violates the deal.
The relationship could be professional or personal. An example of a personal relationship would be a child custody agreement or prenuptial agreement.
Examples of professional relationships are commercial lease agreements, software license agreements, or outsourcing agreements.
The objective of all legal agreements is to lay down the rights and responsibilities of both parties to minimize disputes.
Purpose of the Legal Agreement – Why Do You Need It?
There are several reasons why you need a legal agreement:
- Defining responsibilities: You don’t need to worry about all your duties mentioned in the contract. The details of the responsibilities of both parties stated in the agreement are prepared by mutual consent. So, the question of any dispute does not arise.
- Performance of duties: All parties are legally bound to perform the responsibilities given in the agreement so that no one can withdraw from the contract at the last minute.
- Timeline for task: With an official agreement, as the job will be performed within the deadline as otherwise there will be penalties to be paid
- Legal recourse: If there is a decline in the relationship between the parties to the agreement, then the contract can be dissolved
- Avoid legal action: Agreements drafted by professionals ensure that businesses don’t violate any regulation and be subject to substantial penalties. In extreme cases, companies might be forced to wind up. If businesses follow the guidelines given in the agreement, they can focus on business growth and optimizing profits.
- Termination: If the parties to the contract do not wish to continue working together, the agreement may be terminated
Contents of the Legal Agreement – Inclusions
There are different types of legal documents, and a complete list can be found here.
However, every legal agreement must fulfill the undermentioned criteria:
- Parties to the agreement: All agreements should clearly state the parties involved in the agreement
- Offer: There has to be an offer made by one party to another for the performance of a task. The person making the offer is known as the offeror, and the person the proposal is being made to is known as the offeree. It signifies the willingness of one party and an invite to another party to accept the offer. The offer has to define the quantity, quality, price, and delivery details to qualify as an offer.
- Acceptance: The offer made by one party has to be accepted by another party. The other party should agree to perform the task according to the expectations of the party making the offer. Acceptance signifies an agreement to enter into a contract. It is the final stage of a deal.
- Consideration: There has to be adequate consideration for the task that is to be performed
- Mutuality of obligation: In a job contract, the employer is under obligation to provide suitable work and remunerate the employee for it. The employee is under obligation to personally complete the task. There has to exist a mutual understanding between the two parties. Mutuality primarily refers to both parties being bound by the agreement or neither party being bound by the agreement. Without a meeting of minds, correlation cannot exist. Unilateral contracts do not fulfill this contract as the deal secures only one party.
How to Draft the Legal Agreement? – Points to Consider While Preparing the Agreement
While drafting a legal agreement, the following points need to be kept in mind:
- Parties involved: The names of the parties to the agreement and the relationship between them. You need to ensure that all the parties are competent to contract and are entering into the agreement without any coercion.
- Date of the agreement: An agreement is not valid without the effective date
- Purpose of the agreement: The purpose for which the contract is being entered into must be stated clearly
- Laws of the state: The laws of the state which apply in case there is a violation of the agreement
- Consideration: The payment to be made on satisfactory completion of a task. The proposal could be in the form of compensation or exchange of goods. This must be specified in the contract.
- Penalty: Penalty for nonperformance of a task or default in payment
- Confidentiality clause: To protect trade secrets or similar confidential information. This clause must be incorporated in the agreement
- Resolution of disputes: The method by which the dispute will be resolved, the legal jurisdiction, responsibility for payment of legal fees should be included in the legal agreement.
Negotiation Strategy
A legal agreement contains the terms and conditions of the agreement. Apart from the nature of the service being offered or the goods being sold, it includes the consideration paid for them. Both parties should discuss all the clauses and come to a consensus before agreeing. This will minimize disputes.
Benefits & Drawbacks of the Legal Agreement
Here are some of the benefits of a legal agreement:
- Protection of interest: The interests of both parties to the agreement are protected by law. If either party breaches a clause in the agreement, they will be taken to court. If there is no written agreement, either party may violate a clause in the contract but cannot be taken to court. Written contracts are enforceable for up to 6 years.
- Performance standards: The task mentioned in the agreement will be performed according to the rule mentioned, or else payment will not be made. There will be no dispute regarding performance or nonperformance.
- Termination: If it is found that either party in the contract is unable to deliver the job as per expectations, then the agreement can be terminated prematurely.
- Dispute resolution: Dispute resolution is more straightforward as all the terms and conditions regarding the business are mentioned in the contract
Here are some of the drawbacks of a legal agreement:
- Time-consuming: Legal contracts cannot be drawn overnight as the parties to the contract might want to negotiate the terms and conditions. They might take months, depending on the complexity of the task.
- Expensive: While it is advisable to use the services of a reputed legal professional, the charges are high
What Happens in Case of Violation?
A legal agreement is an official document, and the parties to the agreement have to abide by the clauses in the contract.
The parties to the agreement discuss the various clauses of the contract and enter it after there has been mutual consent.
All agreements are drafted according to the laws of the state where the contract is being entered into. Penalties for violation depend on the laws of the state.
There is an offer made by one party to another party for performing a particular task within a given deadline, maintaining a certain standard.
When there is a breach of contract, the aggrieved party will take legal action against the offending party. This would involve demanding compensation for the loss of business or repossession of the asset being let out.
A notice is sent to the offending party detailing the violation of the specific clause(1). The notice should state that if there is no resolution of the dispute, the contract stands terminated and details of the compensation for damages are also included
If the other party performs the task satisfactorily, then they get remunerated for that.
The agreement has clauses relating to nonperformance and delayed payment as well, including the penalty.
There are always two or more parties in a legal agreement. The purpose of these agreements is to ensure that the interests of the parties to an agreement are protected.
These agreements lay down the rights and responsibilities of all the parties to an agreement, so that if there is a breach of any clause by any party, then the other party can take definitive legal action. Legal contracts vary according to the objective of the parties involved. Also, they are prepared by the laws of the state.
If the parties to the agreement feel that the objective has been fulfilled, then they can terminate the contract(2).