The Basic Types of Commercial Contracts

Business contract discussionStarting a business is an exciting achievement. One of the essential parts of any business regardless of the size and sector is a contract. Most commercial contracts are under state laws unless they involve foreign governments or national security.

The uniform commercial code is the standard business code for business transactions. There are however different versions of the code among various states. You should get commercial lawyers in Townsville to guide you through the commercial contracts under the uniform commercial code. Here are the standard contracts across most industries.

Definite Quantity Contract

This is a contract for the delivery of particular services and supplies at a specific quantity at selected locations over a specific period. It is applicable in situations where you will need an exact amount of materials for the duration of the contract period. The supplies should also be regularly available over the agreed period.

Firm-Fixed-Price Contracts

In these contracts, the contractor agrees to supply all materials and services for a fixed price. The contractor bears the burden of risk and takes full responsibility for all costs as the price is non-adjustable. He/she should control costs to maximise profits but should still perform efficiently. Firm-fixed-price contracts are beneficial to customers as they can plan their finances efficiently and they are cushioned from price inflation.

Fixed-Price Contracts

These contracts have adjustable prices. They include a target and ceiling price. The ceiling price is the maximum price that you can pay the supplier. You can only the ceiling and target prices according to specific clauses in the agreement. Some contracts also include incentives for exceeding r achieving selected objectives. These include delivery dates and technical performance.

Regardless of your type of contract, there are essential elements of a legally binding agreement. These include offer, acceptance, consideration and the intention of both parties to create a legal relation. Both sides should also have the mental ability to appreciate the consequences and terms of the contract.