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In order for a contract to be created, there must be an offer, acceptance, and consideration. Offer and acceptance pretty much speak for themselves. When it comes to an offer, it needs to be specific and understandable. Acceptance must also be apparent, and you can’t enforce an agreement with no explicit acceptance by the other side. Consideration is where the bulk of the contract is centered. Consideration is the “bargained-for exchange” between two or more parties.
If you have found this article online, you are likely considering writing your own business contract in Illinois. While it is always best to consult with an experienced business lawyer when considering drafting and entering into a contract with one or more other people, there are some helpful tips to be had if you are determined to do it yourself. While you can look at an online template to guide you, these are usually not the kind of customized and specific contracts that will best protect your business interests. Illinois contract law is like contract law in most states, and there are some basic principles to keep in mind as you draft your contract. Read on to find out more about writing a business contract in Illinois.
Understand What Creates a Contract
In order for a contract to be created, there must be an offer, acceptance, and consideration. Offer and acceptance pretty much speak for themselves. When it comes to an offer, it needs to be specific and understandable. Acceptance must also be apparent, and you can’t enforce an agreement with no explicit acceptance by the other side. Consideration is where the bulk of the contract is centered. Consideration is the “bargained-for exchange” between two or more parties. One party has something they want or can provide, and the other party has a need or a product they can sell. The consideration in business contracts is usually services or goods for money, and that is the bargained-for exchange. Understanding the three main factors of a contract offer acceptance and consideration will put you in a better position to write an enforceable contract.
Always Think about Making the Contract Enforceable
If you are writing your own contract, always think about what you can include in it to make it enforceable by a court if it needs to be. In other words, make that contract legal. If the contract is illegal (not to be confused with if the contract is for an illegal purpose), it is enforceable in most situations. For instance, if the contract is incomplete or has portions that are convoluted or difficult for an unbiased third party to understand, you’re going to have problems enforcing that contract. Your contract needs to be unambiguous, meaning that different people could have the same understanding of the contract, and it is not open to multiple different interpretations. The best way to keep your contract unambiguous is to keep it simple. Use simple language and short paragraphs. On the other hand, don’t confuse simplicity with detail. Your contract should be as detailed as possible. The more significant the number of issues you can address within the four corners of the document, the more enforceable your contract will be, offering you the highest level of protection.
Furthermore, in order for your contract to be legal and enforceable, it cannot be for an illegal purpose, it cannot be entered into with a minor, and it must have mutuality of agreement, otherwise known as a meeting of the minds. Everyone has to be on the same page regarding the contract and its purpose.
While some states will enforce an oral agreement, you are just asking for trouble by pursuing that route. You could be spending a lot of time and money trying to get your oral contract enforced and still end up losing in court due to a lack of evidence. Get the agreement in writing. In fact, if the contract will take over one year to complete, concerns the sale of goods over $500, or concerns the sale of land, it has to be in writing. For the most up to date information on Illinois contract law, read our article, Illinois Contract Law Changes
Agree on terms
Once you have an offer, acceptance, and consideration, you need to make sure that all parties agree on and use the same terms. When writing a business contract, you should include a list of definitions in the beginning so that there can be no claims of confusion later on if enforcement of the contract becomes a legal issue. If the terms are clearly defined in plain language in the actual body of the contract, it is near impossible to dispute them later after signing the contract.
Include Language about Governing Law and Attorney’s Fees
Since you are drafting an Illinois contract, you are probably doing business in Illinois, and the contract should state that it is subject to Illinois law. You must include the fact that any legal proceeding will take place in an Illinois court, otherwise known as the venue. The last thing you want is for the other party to claim that the matter must be litigated in a different state for some reason; that will only add additional expense and hassle to the contract enforcement proceedings. You will also want to cover any potential attorney’s costs and fees associated with enforcing the contract. In other words, you state in the contract that if the other party does not perform, if you take them to court and you win, they have to pay your attorney’s costs and fees.
Include Language about the Completeness of the Agreement
This is known in the industry as the “merger clause.” In other words, you should include language that states that this is the entire agreement. If you end up in court, having a merger clause in your contract will go a long way in making your contract enforceable.
Address the Issue of Severability
If for some reason, the court finds that one part of your agreement is not enforceable, you need to have language addressing “severability” in your contract. What severability means is that even if the court finds a part of the contract unenforceable, the rest of the contract is still good, meaning that you can protect yourself from additional loss.
Mediation and Arbitration
In the event that the parties dispute the contract, include a clause addressing arbitration and mediation. In other words, if you want to avoid going to court, pick the most suitable method to resolving your dispute. Arbitration is a loose form of litigation, where an arbitrator can listen to the respective parties and review the evidence and then issue a binding decision. Mediation can be binding, depending on how the contract is worded, but all courts encourage parties to attempt to resolve their issues before filing a complaint, so if you do not want arbitration, you should at least try mediation and include that requirement in your contract.
Termination of the Contract
If for some reason, one or both parties want to terminate the contract, the document should provide instructions on how termination will be handled. Termination language is one of those things where you would rather have it and not need it, but if you do need it, you will be happy to have it. A clear and well-defined way out of the contract is of benefit to everyone since, again, the expectations between the parties are clear and well-defined.
A lot of small business owners forget this but not only do you need to clarify how and when money will be exchanged, but you also need to detail what will happen for non-payment or late payment. Construct a schedule of fines and or late fees to deal with this issue before it arrives. Additionally, seeing that there are penalties clearly given in the written agreement will not only make it easy for the court to enforce them, but it will act as a deterrent to the party who is considering not paying or paying late for any reason.
You Might Want to Keep it Confidential
If you are an Illinois small business owner offering something new or unique, you may want to add a confidentiality clause to your contract. Depending on what sort of business you are conducting with the other party or parties, they could have the opportunity to peek at your business practices. If you are doing something outside the standard and it’s working well for you, you won’t want them discussing it with anyone else. Err on the side of caution if you think it’s a possibility and requires confidentiality.
Ultimately if you want a bulletproof contract that you can be 100% certain of, you should consult with an experienced business attorney who practices in Illinois. The benefits of having a signed contract that is well drafted and enforceable cannot be overstated. The time and money you could spend trying to defend your contract in court versus the decision to have a contract lawyer assist you is considerable. If you are considering creating a business contract in Illinois, feel free to schedule a consultation with O’Flaherty Law. We have a team of highly experienced business attorneys who would be happy to help you.