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What Are Contracts For?

Updated on October 15, 2018

Contracts - What are they for?

The days of a person’s word or a deal being sealed with a handshake are a thing of the past in our society. It doesn’t mean anything until it has all been put into writing and signed by all the parties involved. Contracts are made to make sure all of the parties involved agree to what will be taking place. Should they not keep their part of the deal they can be taken to court where a judge will decide what course of action needs to be taken to resolve the situation.

There are many different types of contracts out there. They are very common in the world of business. They also have to do with employment, financing for various projects, personal agreements, work relationships, and for services to be provided. People want to make sure their rights are covered so they engage in a contract to protect themselves and to ensure they get paid for the work they are agreeing to do.

A contract can be as basic or as complicated as you want it to be. Some are very simple in nature and only a page long. For example you may have a contract with your child that they won’t drink and drive. They agree to call home if they need a ride and you agree to provide it. Some common stipulations are that they don’t have to explain why they need a ride and you will provide it regardless of what time it is.

Other contracts are hundreds of pages long and they have complicated terminology. Before you sign any type of contract you need to make sure you take the time to read it. If you don’t understand something have an attorney look it over for you. There are some scammers out there that know how to write contracts that may not be ethical but they are still legal. They can be open to interpretation in a court of law so make sure you fully understand what is taking place.

Contracts can be later amended if both parties agree to it. This is done by additional information being written down and then both parties sign it. A contract isn’t valid if all the parties involved haven’t signed it.

Employment Contracts

Employment contracts are becoming more and more common in the work force. They include stipulations that people have to abide by and agree to should they decide to work for the company. There are many different clauses that can be included in an employment contract. The employer does this to protect their own investment in the employee. It is time consuming and expensive to train new people.

Many employment contracts state the employee must work for them for a certain length of time. This can be six months or a year in most cases. Should they not do so, they may have to reimburse the employer for certain classes and training that were provided to them at no cost. There may be a stipulation in there that the employee is eligible for a bonus at the end of that specific period of time.

Confidentiality is a big issue in many types of businesses. It is customary for them to have part of the contract covering this issue. This binds the employees to keep what they see and hear confidential. They can’t take that information to someone else that is a competitor or just to share it. This clause is very important when the company is working on developing new products.

Some types of employment contracts state that the employee agrees not to go into business on their own as a competitor for a certain length of time. Sometimes it goes as far as to say they can’t do it in a certain radius either. This makes sense when you consider how many employees work for a company and then later branch out on their own after they have built up a good reputation for themselves.

Should you be asked to sign an employment contract you want to look over all the details very carefully. You are legally bound by the information that is in that contract. You can’t be forced into signing it, but most employers won’t give you the job if you aren’t willing to do so on their terms.

Employment contracts are something you will be seeing more due to how they protect the employer. They also help to ensure the employees know what is expected of them. This helps to eliminate common problems that may arise. It is usually a good method of building a solid working relationship for both parties.

Mobile Contracts

It seems like everyone out there has a cell phone these days and there are many companies to choose from. You may find a certain type of phone you like or know where you can have service that covers your common area of travel. Before you can get these types of cell phones though you need to really look closely at the mobile contract. There may be fees and clauses that you aren’t going to be happy with.

Most mobile phone contracts are for a period of two years. That is a long time to be committed to a company you aren’t happy with. This is why you need to make sure you know what you are getting from the very start. Take the time to read information about certain phones and the quality of customer service from the mobile phone provider.

Some cell phone companies require you to pay a deposit for your service. You will generally get this back at the end of the first year if your account is still in good standing. Should you decide to cancel your phone service before the contract is done they can keep that deposit. They can also charge you an early cancellation fee that is generally around $500. These fees apply if they end up having to shut off your cell phone for non payment as well.

You will notice many cell phone companies offer newer phones and better plans as time goes by. Most of them will allow you to take advantage of such upgrades. The catch though is your two year mobile contract will start all over. Keep this in mind if you aren’t sure if you want to continue with the same cell phone company for a length of time.

Due to the many gray areas in these mobile contracts many consumers find themselves in a mess. Make sure you carefully read all of the details and that you understand them before you sign up for cell phone service with a certain company. If you don’t want to go this route you should consider buying a prepaid cell phone that you can end service on at any time due to there not being any type of contract.

Service Contracts

If you have purchased any type of electronics or home appliances recently you were likely asked if you wanted to buy an extended warranty on the product. Even if it already comes with one you can choose to lengthen the period of time. Generally these types of extended warranties are very affordable too so you can easily think they are a good deal. Companies are making billions of dollars each year with these types of warranties.

You need to make sure you understand what is covered in that service contract though. Generally you will be asked at the checkout if you want it. They don’t give you anything to read and they certainly don’t give you all of the details. As a result of this many consumers presume they have coverage that doesn’t really exist on their product. They are frustrated and upset when they try to get the item replaced or repaired and then they get the details of that service contract they paid for.

One way to avoid this issue is to get the information on what you are planning to buy and then go home with it. Call the company that makes what you are interested in and talk to them about their service contracts. You can also access most of them online and read them completely before you make the purchase.

If you don’t like what information you find then you have a couple of options. You can choose to buy the product but not waste your money on the extended warranty. The other choice is to look at buying another brand that you like the terms of better.

The experts out there though are telling consumers to not fall for this marketing ploy though. They haven’t found these service contracts to be worth it. They are just one more way in which the manufacturer is taking in more money from consumers. They are offering lower prices on the product to make the initial sale and then making a profit at this point.

Another reason why they don’t recommend these types of service contracts is because the product should do well enough that you don’t need to extend the warranty. Look for items that offer a very good warranty from the moment you buy it at no extra charge to you.

Government Contracts

Many contracts out there are under the guidance and direction of the government. They often enter into them to help the economical development of society as a whole. These contracts may pertain to employees or to work that will be done by companies for the government. Employment contracts for government workers are often very detailed so that there is no misunderstanding as to what the role of either is in relationship to each other.

Government contracts that pertain to companies are handled differently. When work is to be done companies that are interested in doing so may bid on the project. There are programs for small businesses and disadvantaged businesses under the government policies as well. Those that qualify and become certified for such work can then compete with the larger companies for government contracts.

The government oversees spending on the projects and ensures that all funds are appropriated accurately. It is possible for the winner bidder to subcontract the work. The government will want documentation of how all the funds were sent. They will likely follow up on it too so that there is a good system of checks and balances in place.

Should you decide to do work with the government, you can expect a contract to be a part of the deal. Many companies really enjoy doing government work though as they know they aren’t going to be taken advantage of. They know the government is going to be very straightforward with what they offer and with their contracts.

As of right now the government of the United States has more contracts in place than any other entity. You can be confident that they know what they are doing when it comes to them. If you have any questions at all about one that is in your direction you should ask instead of assuming that you know what will be expected.

These types of contracts are generally very lengthy though and they can be time consuming to read. Expect lots of legal terms to be found in them as well. It may be wise to hire an attorney that is an expert in the area of government contracts to assist you. This way you can be sure you understand what you need to do before you sign them. The government is certainly not an entity you want to get yourself tangled up in a mess with.

Simple sample construction contract


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