Contracts are a necessary component of our daily lives. Contrary to popular assumption, contracts are utilised extensively not only in business transactions but also in our daily lives. You might be astonished to learn that on a daily basis, one signs numerous contracts! Contracts are used in a variety of situations, including signing a business agreement, purchasing a movie ticket, accepting the terms and conditions on a website, and boarding a bus. Contracts are everywhere.
WHAT ARE CONTRACTS?
An agreement enforceable by law is a contract, according to Section 2(h) of the Indian Contracts Act,1872.
To put it another way, a contract is a written or spoken agreement respecting an obligation that is legally enforceable. In a contract, the parties define their mutual responsibilities, rights, and obligations in relation to the essential terms and conditions. In other words, a contract governs a connection by defining the partnership’s terms and the scope of labour.
There are two types of contracts: written and oral.
A written contract is a printed document between two parties that spells out their responsibilities to one another. For business dealings or other major formal agreements, written contracts are generally favoured over oral contracts. This is due to the fact that a written document has greater evidentiary value in a court of law than mere words. Furthermore, a signed contract helps to reduce the risk involved. It is often recommended that difficult contracts be reduced to writing. The types of agreements that must be provided as a written contract are outlined in Section 25 of the Indian Contract Act, 1872.
An oral contract is a sort of business agreement that is outlined and agreed to verbally rather than in writing. Oral contracts are often regarded as valid in the same way that written contracts are. In other circumstances, however, an oral contract is only accepted if it is accompanied by written paperwork. Other evidence that can support the enforceability of oral contracts includes witness testimony, bills, emails, and so on. Simpler contracts, where the parties are unlikely to resort to court, are best suited for oral contracts. Complex oral contracts should be avoided since they usually fall apart when examined by a judge. This is because reaching an agreement on the finer elements of an oral contract is difficult.
WHY DO WE NEED CONTRACTS?
- RECORD OF COMMITMENT
Contracts are legal documents that outline the terms of a relationship between two parties. Each party owes the other some responsibilities and has certain rights. A contract serves as a graphic representation of this relationship.
Every element and the extent to which the parties are obligated to one other are likely to be stated in a well-drafted contract. The connection between the parties is defined by a contract. The other party can take the matter to court if one of the parties fails to fulfil its obligations.
- PREVENTS CONFLICT AND MINIMISES RISK
Contracts spell out the responsibilities of each side. As a result, there is more clarity between the parties and a greater understanding of the deal. Conflicts in the workplace are undesirable because they squander resources that could otherwise be employed to boost productivity.
Contracts also help to reduce risk by laying out the scope of one’s liability. For example, in the event of a business’s failure, a contract may restrict one’s culpability and protect one’s personal property from being sold to pay off the debt.
- CONTRACTS SERVE AS A COMMUNICATION TOOL
Contracts are collaborative and relational by definition. They lead to transparency and improved communication by explicitly identifying the relevant provisions for the parties. A contract with muddled language and vague provisions is likely to produce a lot of misunderstanding between the parties.
Contracts with explicit terms and conditions are preferable over contracts without them. All relationships, including business ones, require clear communication to thrive. Contracts serve as an effective means of communication that ensures a good connection.
- CONTRACTS INCREASE OPERATIONAL EFFICIENCY
Contracts are essentially legally binding agreements that declare that one party will deliver products and services in exchange for a specific payment from the other. A contract with the proper term will aid in the efficient operation of the business.
It’s crucial to recognise that a contract blockade is the same as a revenue blockade. A well-drafted contract, on the other hand, ensures a seamless flow of operations and, as a result, makes it simple to earn revenue.
Contracts are also easier to administer and are more thorough. This allows the company to save a significant amount of money that can be used for more productive purposes.
- CONTRACTS ARE USED AS LEGAL TOOLS
Contracts are crucial in our lives because they legally bind the persons involved in a relationship. Any contract breach can be remedied, and damages can be compensated. Aside from the basic characteristic, the contract also incorporates other important legal aspects that benefit the parties’ relationship.
The law of contracts contains legal terms like jurisdiction, controlling law, arbitration, and so on. Contracts describe regulations that are simple to follow by distilling the legal ideas contained in the contract. This primarily aids the contracting parties in comprehending the legislation.
Working without contracts can lead to problems in a commercial arrangement, thus it’s not a good idea. When problems emerge between parties who are not involved in a contractual relationship, the only option is to go to court. The judge must evaluate each party’s liability to the other, and the decision may not be satisfactory to either party.
To avoid such dangers, it is a good idea for the parties to discuss the main terms and conditions ahead of time. A contract, in addition to preventing the aforementioned risk, leads to improved business relations and operational efficiency.
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
If you are interested in participating in the same, do let me know.
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