Our corporate lawyers in Charleston regularly review, draft and develop a range of business contracts for entrepreneurs, professionals, startups and businesses throughout South Carolina. Examples of business contracts that our law firm handles include, but are not limited to:
In general, a business contract will involve an exchange of promises set forth in a written agreement. If the business contract contains the following elements it will be binding on the parties and enforceable under law. An enforceable business contract in connection with a business transaction will generally include the following elements:
Offer – one party’s promise in exchange for performance by another party;
Acceptance – one party’s agreement to be bound by the terms of the offer;
Consideration – a benefit (generally money) which must be bargained for between the parties and is an essential reason for a party to enter into the contract ;
Intention to Be Legally Bound;
Legal Purpose – the contract must be for a legal purpose;
Capacity – legal competence of a party to enter into a valid contract (e.g., age, mental capacity, and legal existence);
Mutual Assent – a mutual meeting of the minds or understanding between both parties; and
Certainty of Terms – the terms of the contract must be precise and definite.
Framework of the a Business Contract
Every business contract in South Carolina should (i) be in writing (although oral contracts are enforceable in certain circumstances) and (ii) accurately detail the substantive terms of the contract.
The title should appear in bold capital letters at the top of the first page in all capital letters. The business contract title should accurately describe the substance of the underlying business contract (e.g., asset purchase agreement, stock purchase agreement, operating agreement, employment agreement, consulting agreement, independent contractor agreement, mutual nondisclosure agreement, etc.). The title page should also in some situation also identify the parties to the business contract and the date of execution.
Table of Contents
A table of contents should be reserved for those business contracts that are more than fifteen pages. A table of contents will allow the reader to quickly locate the important provisions of the business contract. Moreover, a table of contents will provide the reader with an introduction to what is included within the four corners of the contract.
The introductory clause identifies a number of crucial pieces of information. The introductory clause should identify the parties, whether the party is an individual or a business entity, the location of the individual or the state and form of business entity, whether the business entity is a partnership, limited liability company or corporation, the nature of their relationship, and the date of the agreement. For example:
This Stock Purchase Agreement (the “Agreement”) is made and entered into as of November 1, 2018, by and between XYZ, LLC, a South Carolina limited liability company, with its principal place of business at 164 Market Street, Charleston, South Carolina 29401 (the “Seller”), and Jane Doe, and individual, residing at 501 Belle Hall Parkway, Mt. Pleasant, South Carolina 29464 (the “Purchaser”).
Note, failure to properly identify the parties could affect the enforceability of the underlying contract. Moreover, particular attention should be given as to whether the business contract will be effective when executed or if a future contingent date is appropriate. Caution should be used when back-dating business contracts and can, in some instances, result in civil or criminal liability.
Recitals in business contracts are offered to describe the fundamental purpose of the agreement and any important background information. The recitals should not include the substantive promises and mutual exchanges of the agreement. Although generally not considered binding terms of the business contract, recital may be offered as binding terms. For example:
The parties acknowledge and agree that the recitals set forth above are true and correct in all material respects and are incorporate herein and made part of this Agreement as if fully set forth herein.
A recital of consideration is also an important element of the business contract. A recital of consideration is provided to signal the end of the recitals and the beginning of the body of the agreement. For example:
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth herein, together with other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties agree as follows:
The body of a business contract sets forth the substantive terms of the Agreement, including the parties respective rights, duties and obligations. The body of the business contract is structure with the most important provisions of the agreement appearing first and the boilerplate provisions appearing last. For example, an asset purchase agreement may provide a description of the property being sold, the purchase price and payment terms, representations and warranties, terms of closing, including any conditions to closing and closing deliverables, post-closing covenants and obligations, including indemnification obligations, and miscellaneous terms.
Contract Schedules and Exhibits
Schedules and Exhibits incorporated into a business contract follow the signature page. In brief, schedules are used to denote information that is supplemental to the body of the agreement. The most common example is disclosure schedules in purchase agreements, which are used to identify exceptions and qualifications to a party’s representations and warranties. Exhibits are stand-alone ancillary agreements to be entered into in connection with the agreement. For example, in purchase agreements, the exhibits would likely include a trademark assignment, business contract assignment, commercial lease assignment, bill of sale, noncompete agreement, consulting agreement, etc.