The New Times (Kigali)

12 November 2012

Rwanda: Dealing With Business Contracts

Despite the size of your business, nature of products or services on offer, you need a business contract to make your business safer and less risky.

A business contract can be described as a binding legal agreement between two parties agreeing to do or not to do some things.

A contract is considered binding when it has put into consideration the interest of each of the parties involved without making one of the parties to take advantage of the other.

While business contracts vary depending on the type and reasons why the parties are entering into an agreement, with most of them involving employment, lease of premises or equipment, among others.

The contract becomes important when you have made an offer to the other party and picks an interest and will to go into business with you.

To trade fairly, then you need something that will help you to understand each other and bind each of you to fulfill your obligations as per your agreement.

In this case, if one party fails to fulfill what was agreed on, then the contract can be used to sue the other party. A contract becomes vital as it builds trust among parties.

The contract should mention parties involved in the contract, the date at which the contract is penned, terms used (if any), description of goods or services, the amount involved among others.

Also, consider putting in the termination date of the contract and when you expect to renew it (if there is any possibility), as well as any other special conditions. But these will mainly involve bigger business agreements. Hence, a lawyer's advice is important.

For small businesses, for example, a grocery shop supplying food stuffs to a small restaurant, an agreement highlighting what you are dealing in, price, terms of payments and the witnesses to the agreement may be essential with each party keeping a copy.

Always be careful when entering into a contract with a party since it is about how you negotiate and convince the other party that will determine how you will work. Make sure that you also add a clause which gives you an exit window in case you deem it not profitable to you.

Be wary of the price terms, date of delivery and binding clauses that apply to penalties in case of breach of contract. These may tactfully be used by the other party to dupe you later.

Most importantly, consider your long term and short term interest in the contract. For instance, does the contract stop you from working with other competing parties in future?

Remember that no matter the transaction or the business type, you always need a contract.

You may never know the intentions of the other party in an agreement.

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