Types of contracts

HIRE PURCHASE CONTRACT/CONTRACT OF SALE

*This contract takes place between the buyer and a seller when a credit transaction takes place
*The seller undertakes to deliver the goods.
*The owner remains the buyer of the goods until the full price has been paid (last instalment)
*If then buyer misses one instalment, the buyer gives one months notice that the instalment is due
*If the buyer fails to pay, the seller repossesses the goods and keeps all the instalments paid as well

CREDIT AGREEMENTS WITH RETAILERS/CREDIT AN OPEN ACCOUNT

Retailers enter credit agreements and lay-bye contracts with customers
Agreement is done when customers don’t have cash to buy goods
Customers open an account and decides to the option of paying in six months interest free or 12months with interest
The retailer allocates maximum credit limit (amount that the customer cannot exceed when purchasing goods using the card)
The customer undertakes to pay instalments regularly at agreed payment dates usually last day of the month
If the customer fails to pay the business immediately stops allocating the credit and can taken further steps, like handing the account to the debt collectors (i.e. lawyers)

LEASE OR RENTAL CONTRACT/AGREEMENT

· This agreement takes place between the owner of the property and the client who wants to use the property
· The following items are usually leased or rented out:
-buildings
-equipment
-vehicles
-ball gowns and costumes etc
-cell phones
· The client pays for the use of the item and does not obtain the owner’s rights
· Lease or rent fees are usually paid in advance i.e. beginning of the period (month)
· Such contracts are for a certain period and fixed amount of rent is paid to the land lord


RENT to BUY:

· Sometimes some items are leased or rented to be purchased at the end of a certain period

· The tenant is given an option of renting for a specific period which he/she owns after a certain period (e.g. Vodacom offers 24months contract and after that the client owns the phone)

COTRACT WITH COMMERCIAL BANKS

· This is regarded as contract too, because
· When you open the savings account or fixed deposit with the bank, the bank undertakes to you’re your money safe and pays you the amount of interest agreed.
· The same way when the bank lends you money you undertake to pay back the loan and interest charged by the bank

CONTRACTS WITH THE GOVERNMENT

Government enterprises can also be part of the contracts i.e.:
· Municipality undertakes to deliver clean water regularly and community has duty to pay for the water used
· TENDERS:
The company who has won the tender to build RDP HOUSES on behalf of the government under takes to deliver the size and quality of houses at an agreed period
And the government undertakes to pay the building contractor an agreed amount for the houses built





EMPLOYMENT CONTRACTS

· Employment contracts are signed between the employer and the employee (worker)
· The employment contract should comply with or be based on legal rules.
· The following are the common laws governing employment:
1. Basic conditions of employment act (BCEA)
2. Labour relations act (LRA)
3. Employment equity act (EEA)
Common issues addressed by these laws include the following among others

Contracts that an entrepreneur should enter into

1. Rental contract
2. Hire purchase contract
3. Insurance contract
4. Contract of sale
5. Contract of employment
6. Contract of lease
7. Contract of franchise
8. Credit agreements with retailers
9. Contract with commercial banks

Video on business contracts

Requirements for a valid contract

For a contract to be valid it must meet the following

• Parties must be of legal age and sound mind.
• Parties must be serious about what they are doing.
• Parties must make sure that the conditions stated in the contract are reasonable and that they will be able to comply with them.
• Parties must be clear about what is expected of them.
• Parties must enter into a contract for a legal purpose and not for illegal reasons e.g. to steal from someone

Contracts

What is a contract?

A contract is an oral or written agreement between two or more parties.

• Once the agreement has been made between the parties, it will legally binding.
• It is advisable to enter into a written contract to serve as a proof that an agreement has take place.
• Certain contracts are only valid if they are in writing, for example an insurence contract.
• You should first read the contract very carefully, and make sure that you understand everything before you sign it.