A contract forms the heart and soul of a transaction mutual agreement between two or more parties.

Anything that goes wrong with the contract can lead to problems in future for both the parties. These problems would require the intervention of courts of law to settle the dispute which is a time and money consuming process. Therefore, it is essential that both parties are clear about why they want to enter into a contract. It is also important that the contract process should be simple, clear and easy to understand. Understanding Contracts What is a contract? A contract is a mutual agreement that takes places between two or more parties in order to effect a specific performance that is legally valid. This means that two parties cannot contract for illegal activities such as drug trafficking, smuggling and so on. The purpose of the contract itself should be legitimate in order to uphold its enforcement before a court of law. Types of contracts- Contract can be broadly classified as oral, written, explained and understood or communicated. Asking for a chocolate from the shopkeeper is an oral contract, whereas signing a bond by an employee for the company is a written contract. Contracts cannot be charity based. There must be scope for mutual benefits. One comes into a contract only if all the terms and conditions are beneficial for both parties. Understanding The Contract Process Here is how the contract process begins: Offer and Acceptance An offer is a proposal given by the offeror to the offeree with certain terms and conditions mentioned prior to the agreement. This takes place in the contracts review process. Once the offeree accepts the offer, the parties discuss the terms and finalize it by signing the contract. No further negotiations can be done after this stage of finalizing the agreement. The offer becomes a contract when the acceptance is sent to the offeror by the offeree. Consideration It is very important to have three elements in a contract: namely: 1. Mutual benefit 2. Mutual consent. 3. Mutual consideration. Objectives Before making a contract, all aspects should be taken into consideration such as the financial, legal, social and domestic aspects of the contract. The contract should clearly mention the objectives to the offeree. Legal formalities and writings It is always advisable to have a contract in a written form. This helps to recall the terms and the conditions laid down in the contract approval prcoess and also acts as a legal proof for enforcement of the contract. Contents of the contract should include the following: 1. Date of execution 2. Competence and age 3. Duties and responsibilities 4. Performances/reasons for delays 5. Method of payments 6. Provisions for cancellation of contract.

Disclosures The offeror should mention all the details which he wants his customer to know before entering into a contract. What is written in a contract subsequently becomes a guideline for both the contractor and the contractee during the contracts management process. CONSTRUCTION CONTRACTS Contracts are an essential part of the construction industry. A construction contract can be termed as an agreement entered into by two parties, under the terms of which one party agrees to perform a specific job, supply a specific service or provide an agreed form of raw materials for which the other party agrees to pay. There are several types of construction contracts, which can be entered into by parties like a lump sum contract, unit piece contract, percentage rate contract or target cost contract, to mention only a few. A crucial battle in negotiating construction contracts is waged between the owners desire to get the work done and the contractors desire to get paid for the work performed or goods supplied. The most important aspect of construction contracts is to clearly define the subject matter of the contract, while entering into the construction agreement. Construction estimating software is essential and often overlooked tool that can be used effectively to manage all stages and aspects of construction contracts and can be setup to assist with preparation and project management of the job at hand. Experience and understanding of the administration aspects of construction contracts is important. Cost overruns and mismanaged resources are a frequent hazard that can adversely affect construction contracts. Thats where construction proposal, estimating and management software can assist. Because of the nature of activity undertaken in construction contracts, the date of which the contract activity is entered into and the date when the activity is completed can fall into different accounting periods: therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. Software allows you to properly track and manage resources so that costs can be appropriated correctly and tasks managed correctly. Managing construction contracts requires a hands on approach to ensure compliance with contract terms and conditions and external regulations that may affect the industry. Oversight of construction contractors work including performing site visits during construction to ensure the work is carried out according to the contract documents, monitoring contractor compliance with safety codes, prevailing wage requirements, environmental regulations and other federal, state and local regulations are just some of the core aspects and external factors that can impact construction contracts.

CONTRACT CONDITIONS Every contract sets forth its own terms and conditions. It is mandatory for both the parties to go through the contracts conditions before agreeing to finalize the contract. If one is not satisfied with the conditions, that party is free to clarify why, and can opt to leave the contract if no progress is made to alter or improvise the condition. A contract is a legally valid agreement between two parties for consideration. Contract has legal implications which make it necessary for the parties to be extremely clear about their mutual benefits in the contractual relationship. Certain points should be kept in mind while making contract conditions. These points are: Legal Competence: Both parties to a contract should be legally competent to enter into a contractual relationship. For example, a minor is not considered legally competent. An insane person is not considered legally competent. Determine whether both parties are legally competent. Mutual Agreement: After understanding the aims, objectives and nature of the business, both the parties sign the agreement on the basis of the agreed benefits that manifest on performance of the specific contract. Negotiation can take place to finalize the legal document before signatures take place. Understanding the motive of both the parties: It is very important to understand the objective or the grounds on which both the parties are working. After both the parties are clear about each others motives and expectations from a contract, one can perform the work accordingly. For the same reason, it is important that both the parties should be clear about the issues they are focusing to agree on in the contract general conditions. Consideration: Both parties can sign a contract if it works for both of them. One comes into a contract by providing cash for the goods offered or services rendered by the company. While signing a contract, it is important to be clear about the payment basis. It is equally important to go through all the terms and conditions that are being mentioned in the contract before signing it. The terms, conditions, rules and the regulations act as a guideline for both parties at the time of its specific performance. The duties and responsibilities of both parties should be clearly stated in the contract. If any point is not satisfactory to either party, that point can be discussed, improvised or changed before going ahead with the contract. With these useful tips, remember that the strength of a contract lies in mutual consent of the parties that forms the backbone of a contracts legal validity. Before you sign any contract, be sure of your goals and do a thorough check to understand the terms and conditions before you commit yourself.