It's not a secret that many new businesses fail every year. But when you look at the facts more closely, you find a shocking cause. Part of the reason why so many startups fail is because of how they handle contracts.
In fact, 39% of businesses have reported missing contractual obligations due to poor contract management practices. This clearly indicates that companies should give contracts the attention they deserve.
But what exactly is a legally binding contract? How do you know if an agreement is legally valid or not? What are the advantages of having a notary public review a contract?
All of these questions, and more, will be addressed by our notary public expert witnesses in this post. So, keep on reading.
Before we get into the specifics of what makes a legally binding agreement and how it can affect business success, let's first start with the basics—the very definition of a contract.
A contract is defined in the Philippines' Civil Code as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.
In the eyes of the courts, either type of contractual agreement is legally binding, as any contract entered willingly by the involved parties through an offer and acceptance.
That being said, an express contract, particularly one in writing, is obviously much easier to define and then enforce than an implied contract.
A "binding" or a "legally binding" contract is an agreement between parties that legally binds them to carry out specified transactions, duties, or services. If one party breaks the contract, the other may sue to enforce the terms of the agreement.
Some endeavors have such high stakes that they simply cannot be undertaken without the protection of the contract law. Now, let's take a look at why you need a binding contract.
The short answer is that you need a binding contract to ensure that your rights are protected. In addition to outlining the duties of each party, contracts should be drafted by a public notary with the possibility of future conflict in mind and include a procedure for resolving disputes.
Most of the time, people sign contracts to get something of value. For example, if you want to buy something, a contract can ensure that the seller gives you the item after paying for it. Or, if you're selling something, the contract can ensure you get paid for it.
A legally binding agreement can also provide critical security for business owners and their assets. For instance, if your business encounters problems, a contract can shield you from any legal responsibility.
However, a common misconception is that a contract for a minor project is unnecessary. Regardless of the project size, it's always a good idea to have a contract in place if something goes wrong.
Even a simple, short contract can protect everyone and make it more likely that the project will be finished successfully. You can even put in your contract what should happen if the project runs behind schedule and takes longer than both of you thought it would.
Furthermore, contracts can protect you from having to follow unfavorable rules. For example, if you work for a company without a contract, the company may later ask you to sign an agreement that benefits them rather than you. Insisting on a contract from the start will help define the relationship and ensure you are aware of your responsibilities.
A binding contract can be created in a variety of ways. The most efficient approach is for both parties to collaborate on writing a contract that specifies all of their relationship's terms and conditions.
In addition to the abovementioned requirements, a signature is another necessary but often overlooked element of any legally binding agreement. The contract cannot bind either party if the person entering into it lacks the legal capacity to do so under the law.
If you've ever signed a contract before, whether for a job or a business transaction, you may have noticed that the last page of the document contains a space for both parties to sign. Sometimes, you may even be required to sign on each document page.
Ultimately, a contract is valid under Philippine law regardless of its form, whether oral, written, electronic, or digital. It only loses legal force if it contains unenforceable language or lacks a condition. In such a case, a contract would not be nonbinding.
This is a frequently asked question among contracting parties. But before we get to the answer, let us first define notarization and discuss why it's necessary for your contract.
Notarization is the official fraud-prevention process that assures transaction parties that a document is authentic and trustworthy. However, it is not a magic bullet that eliminates all flaws in legal documents.
Generally, contracts need not be notarized because the signed agreement itself makes it legally binding.
The Civil Code also states that a contract is valid and legally enforceable if all elements, namely consent, object, and cause, are present. Therefore, if these elements are present, the contract is valid even if it is not notarized.
Going back to the original question, why is there such a high demand for notarization services if not all legal documents require notarization?
Although not all legal documents need to be notarized, the importance of this process cannot be underestimated.
It's not just a meaningless routine task; it's crucial to the public because it turns a private document into a public document—which means that it can be used as evidence without any other proof that it's real.
As a result, notarial acts must be exercised with extreme caution, and public notaries must diligently carry out their responsibilities.
Because binding contracts carry with them the force of law, all parties are required to follow its terms and conditions.
If one or both parties suspect a breach of contract and wish to challenge the validity of their agreement, they may need to take their dispute to court, where a judge will decide whether or not a breach of contract has occurred based on the criteria mentioned above.
Remember that any legal action should be carefully considered because of the complexities and length of time involved in determining contract law. However, there are some circumstances where you can legally breach binding contracts.
Given the specifics of any contract dispute or negotiation, it's always wise to consult an attorney before moving forward.
Legally binding contracts can assist you in pursuing the other party if they fail to meet their end of the bargain. You can use the power of the law to enforce the contract's terms and conditions as long as it contains all of the elements required to make it legally binding.
Remember that the right tools can help you avoid entering into contracts that will work against you in the long run.
Learn how our notary public expert witnesses can help you close agreements faster by using digital documents, legally binding e-signatures, and remote notarization with world-class encryption and security.
Our UNAWA SignSecure™ and RNotary™ solutions are ideal for contracts and important documents that must be signed and notarized quickly and securely.
Sign up now and get the efficiency of digital workflows with the legitimacy of eSignatures and remote notarization.
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