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When is it a business contract -- and when is it not?

Virtually all business contracts include a promise from at least one party to do something, or to not do something. But not all promises are contracts. The difference can be very important, because while a valid contract can be enforced by law, your business may not be able to go to court to force someone to fulfill a mere promise.

How can you tell if you have a contract or not? Courts look at several things to determine whether or not an enforceable business contract exists.

For an agreement to rise to the level of a contract under the law, it must include an offer by one party and an acceptance of that offer by the other party. The contract must include a bargained-for exchange of promises. For example, one party promises to sell their products to the other party in exchange for money, or other goods. The terms of the contract cannot be overly vague. They must be definite enough for the court to enforce.

When a business or individual is accused of breach of contract, they will often raise a defense that the contract should not be enforced. One such defense is that there was a misrepresentation during negotiations, such as a false statement or deliberate withholding of information. Essentially the defendant is arguing that the other party was dishonest, and that the contract was based on false pretenses.

No business wants a contract dispute to end up in court. One way to hopefully prevent this is to make sure that the terms of the deal are as clear as possible to all parties involved when it is finalized.

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