What is the primary purpose and functions of a contract?
http://en.wikipedia.org/wiki/Contract
The primary purpose of a contract is to formalize and establish a legally binding agreement between two or more parties. It outlines the rights, obligations, and responsibilities of each party involved and sets forth terms and conditions that all parties must adhere to.
The functions of a contract can be summarized as follows:
1. Clear Communication: A contract serves as a means of clear communication between parties, ensuring that all parties are aware of the terms and conditions of the agreement and there is no ambiguity.
2. Legal Protection: A contract provides legal protection to all parties involved by outlining their rights and obligations. It helps in resolving disputes and conflicts as it serves as evidence of the agreement and can be enforceable in a court of law.
3. Establishing Expectations: Contracts set expectations by defining the scope of work, deliverables, deadlines, and terms of payment. This helps in ensuring that all parties are on the same page and reduces the likelihood of misunderstandings or disagreements.
4. Risk Allocation: Contracts allocate risks among the parties involved and specify the consequences if any party fails to fulfill their obligations. This helps in managing and mitigating potential risks associated with the agreement.
5. Flexibility: Contracts provide a degree of flexibility by allowing parties to negotiate and include specific terms and conditions that suit their unique needs and requirements. It provides a framework that can be customized based on the nature of the agreement.
To create a contract, it is advisable to consult with a legal professional or use standard contract templates available online. A contract should be drafted with clear and concise language, include all relevant information, and be signed by all parties involved to make it legally binding.