Business Contracts: The Foundation of Entrepreneurial Success

America has recently seen some of the most substantial growth in new businesses in its history. Driven by several major industries — ranging from artificial intelligence to the “creator economy” — this growth is beneficial for business owners and the economy alike. However, there are some things that Phoenix entrepreneurs should know about enforceable business contracts.

While contract law might not be the first thing to come to mind when building a business, it’s undoubtedly one of the most important aspects. Contracts are legally binding agreements that dictate how everything from partnerships and vendor agreements to client services and employee contracts will operate.

You might be an expert at what you do, but without some knowledge of enforceable contracts, building a successful company will be unnecessarily difficult.

What Are the Elements of an Enforceable Contract?

When signing a business contract, you want to ensure that it’s enforceable. Doing this starts with understanding the elements of such a contract. People often believe that a simple written agreement is enough, but the law is incredibly complex and nuanced. If even one element is overlooked, you may have trouble enforcing your agreement. 

Keep the following elements in mind, and you’ll be well on your way to a valid business contract:

  • A clear and unambiguous offer and acceptance must be included 
  • There must be something of value (i.e., consideration) exchanged between the parties 
  • Both parties must mutually consent to, understand, and agree to the contract terms 
  • Contracts are only valid if created for a lawful purpose. Contracts involving illegal activities are unenforceable in Arizona 
  • All parties to the agreement must be competent and not under duress when signing

While these elements may seem simple on paper, the reality is that contract law can get complicated. Litigation often involves parties disputing the meaning of specific terms or even arguing that the wording of a contract doesn’t really mean what it seems to mean. That’s why it’s critical that such agreements are clear and concise when drafted. 

Unfortunately, this is far from the only complicated issue that Phoenix entrepreneurs need to know about enforceable business contracts.

Important Clauses and Specificity

During the drafting or review of a contract, it’s important to ensure that certain clauses are included. Additionally, these clauses should not be vague or open to interpretation. Specificity is absolutely critical — especially for items such as deliverables, timelines, non-performance penalties, and each party’s roles/responsibilities.

So, what do you need to be specific about? While the following list is far from exhaustive, it does give you an idea of what an enforceable business contract looks like under Arizona law: 

  • Payment terms 
  • Termination clause 
  • Dispute resolution 
  • Confidentiality 
  • Non-compete or non-solicitation

It’s easy to notice that there are important issues not listed above. For instance, shouldn’t there be a clause dealing with any potential breach of contract? Absolutely, there should be. However, this goes to show that the most important clauses of any business contract will vary based on the needs of the parties involved. 

Additionally, breaches of contracts are one of the most important issues that Phoenix entrepreneurs should know about enforceable contracts – so any such discussion deserves an entire section. 

Consequences of Contractual Breaches

When one party to a contract fails to uphold their obligations, they may be found in breach of contract. If this happens, there are some very important issues that entrepreneurs should understand. Most importantly, you must recognize that legal remedies for these breaches could include compensatory damages for economic loss, liquidated damages, specific performance to force the other party to comply, or the cancellation of the contract in its entirety.

Of course, such legal remedies would also apply to you if you violated the terms of a contract. Put simply, failing to uphold your end of a legal agreement isn’t something that’s merely frowned upon. The consequences are very real and very serious. You should also keep in mind that – under Arizona law – parties are required to mitigate potential damages. This means the non-breaching party must make efforts to reduce the losses caused by contractual breaches.

Other Arizona-Specific Issues

If another party violated a contract that you’re a party to, Arizona law requires that reasonable steps be taken to mitigate your damages. However, our great state also has other statutes in place that directly affect what Phoenix entrepreneurs should know about enforceable business contracts. These statutes put the following rules in place:

  • Arizona’s Statute of Frauds: Arizona does grant legitimacy to verbal contracts, but they can be difficult to prove in court. Additionally, the Statute of Frauds requires certain contracts (e.g., real estate, sale of goods over $500) to be in writing 
  • Implied Covenant of Good Faith: All contracts in Arizona have an implied obligation of good faith and fair dealing. This means that —even if not expressly stated — all parties must act honestly and not interfere with the other party’s rights 
  • Prevailing Party Fees: In many cases, Arizona will grant attorney fees to the prevailing party in contract disputes. Make sure you include a clear attorney fee clause in your contracts to benefit from this allowance

Clearly, Arizona takes contractual law very seriously – and this is great news for honest entrepreneurs who just want to succeed. However, it’s important to understand that holding breaching parties accountable – or successfully arguing against unfair accusations of breaches – can be difficult, time-consuming, and confusing.

The Role of Legal Counsel in Enforceable Contracts

The internet has literally placed the full extent of human knowledge within everyone’s reach. Do-it-yourself legal services have become one of the more popular offerings online. However, it’s essential to understand that these DIY websites can be dangerous. The boilerplate forms typically offered are unable to account for individual variances in legal issues.

This is why it’s so important to work with a Phoenix-based attorney when drafting and signing business contracts. A legal professional can ensure these contracts are compliant with state law, and they’re able to draft customized contracts that cater to your unique needs. They can also advise on liability-limiting clauses, intellectual property issues, and represent your interests if contract disputes or litigation arise.

An attorney can help you better understand everything Phoenix entrepreneurs should know about enforceable business contracts. At Resolvere Law, our dedicated team of legal professionals is here to assist. Contact us at 480-568-1327 and ask for a FREE consultation.