Basis of agreement: Overview, definition, and example
What is the basis of agreement?
The basis of agreement refers to the fundamental terms, conditions, and principles that form the foundation of a contract or agreement between two or more parties. It outlines the key elements that the parties agree upon, such as the objectives, rights, obligations, payment terms, and other crucial details necessary for the contract to be executed successfully. Essentially, the basis of agreement defines what each party expects from the other and serves as a reference point for interpreting and enforcing the agreement.
The basis of agreement is often established in the early stages of negotiations and can be included in the form of a written contract or verbal agreement, depending on the nature of the transaction. Clear and well-defined terms in the basis of agreement help prevent misunderstandings and disputes between the parties involved.
Why is the basis of agreement important?
The basis of agreement is important because it ensures that all parties have a shared understanding of the terms and conditions they are agreeing to. Without a clear basis of agreement, the chances of conflicts, misinterpretations, or legal challenges increase. It helps to:
- Set Clear Expectations: It clearly defines the roles, responsibilities, and expectations of each party.
- Avoid Disputes: By having agreed-upon terms in writing, parties reduce the potential for disagreements or legal issues.
- Provide Legal Protection: A well-defined basis of agreement provides a legally enforceable framework for resolving any issues that arise during the contract period.
- Foster Trust: It promotes trust and transparency between the parties, as everyone is aware of the agreed terms.
Understanding the basis of agreement through an example
Imagine you are entering into a service contract with a web development company to create a new website for your business. The basis of the agreement would include several critical components:
- Scope of Work: The web development company agrees to design, develop, and launch a fully functional website by a specific deadline.
- Payment Terms: The agreement outlines the payment schedule, such as an initial deposit of $2,000 and the balance upon completion of the project.
- Responsibilities: It specifies that you will provide content, branding materials, and access to your hosting platform, while the web development company will be responsible for coding, design, and testing.
By establishing this clear basis of agreement, both parties have a shared understanding of the project’s scope, deadlines, and payments, which helps ensure that the project runs smoothly without misunderstandings.
In another example, a partnership agreement between two businesses might specify that one business will provide marketing services, while the other will handle logistics. The basis of the agreement would include how profits will be shared, the timeline for deliverables, and each business’s respective responsibilities.
Example of a basis of agreement clause
Here’s an example of what a basis of agreement clause might look like in a contract:
“The parties agree that the basis of this agreement shall include the provision of marketing services by the Service Provider to the Client. The Service Provider will design and implement a marketing strategy as outlined in Exhibit A. The Client agrees to pay the Service Provider a fee of $5,000 per month for the duration of the agreement. This agreement is based on the terms and conditions set forth in this document and shall be governed by the applicable laws of [jurisdiction].”
Conclusion
The basis of agreement is the foundation upon which contracts or agreements are built. It sets the framework for how the parties will work together and what they are each responsible for. Clearly outlining the basis of the agreement reduces the risk of conflicts and misunderstandings, ensuring that each party has a clear understanding of their obligations and expectations. Whether in business transactions, service agreements, or partnerships, a well-defined basis of agreement is essential for the smooth execution and enforcement of the contract.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.