What is an investment? Every industry have their own definition of the word investment. For many, an investment means the purchase of goods or products that may not be useful now, but will generate income or give really good returns in the future. Individuals or companies who make investments are called investors.
A lot of businesses look for investors, either to help them start their business or help their business grow. Investments involve a huge amount of money that is why it is important that all of the details of the investment transaction is recorded and documented in an investment contract.
In this article we will define what an investment contract is, its uses, the people who are involved in it, why they are important and many more. We have also included different investment contract templates that you may download and use as reference. Check them out below.
Personal Investment Contract Template
Investment Agreement Contract Template
Individual Investment Agreement Contract Template
Scottish Investment Contract Template
Lending Business Investor Agreement Contract Template
Printable Investor Contract Template
Investment Management Contract Template
Investment Management Agreement Contract Template
What Is an Investment Contract?
An investment contract is a transaction where one or more parties agree to invest or shell out a specific amount of money to a particular business or company with the expectation of getting higher returns from the income or profit generated by the business or company. A lot of businesses turn to investors to either help them start their business or further grow or expand their business. Getting an investor to invest in a business is similar to getting a loan in a way. It is because you get money to use for your business and pay them back with the interest. But unlike a loan, getting investments from investors requires an investment contract with provisions that are very different from that of a loan agreement contract.
How useful really is an investment contract? You see, a contract is a formal and legally binding document that is enforceable in the court of law. This means that the investor and the business or company getting the investment are bound to the terms and conditions of the contract making them obligated to it. The contract keeps both parties from performing their responsibilities in the contract. An investment contract is also used to list down everything that has been agreed on by the parties involved. The document is not only used as a proof that the actual transaction took place, but it also serves as a guide or reference for each party if they need to check the contract for some details.
Investments involve a huge amount of money and lasts a long period of time. Written contracts, such as an investment contract is the best type of contract to use for this transaction because it produces a document as proof of the investment transaction. The contracts is also used to list down all of the limitations of each party and their corresponding remedies if any violation is incurred. If the remedies won’t work, then the issue will be brought to court for litigation.
Investment contracts are indeed useful, and with all the details in it you wold want to use an investment contract templates to get things done easily and conveniently.
Who Are Involved in an Investment Contract?
There are mainly two entities involved in an investment contract and they are the investor and the business or company to be invested on. An investor invests their money to a business or company to help them succeed with their business plans. However they don’t do this for charity. Investors expect a return of their investment with the agreed interest percentage when the business starts generating income or profit at the agreed time. The other party could be any business or company that needs the financial support from investors to make their business plans work and become successful.
But there could actually be more than two parties involved in an investment contract as the business or company may need more than one investor. The provisions of the contract depend on what the parties have agreed on. You will need to be very specific about the investment contract you make to ensure that everything is according to what has been discussed and agreed. You will need the help of investment contract templates to get this done right. You may check out free sample templates, like Investment Contract Samples & Templates, Restaurant Investment Agreement, and Proposal Contract Template.
What Basic Information Should You Included in an Investment Contract?
It is important that you know the basic information that you need to look for in an investment contract as it will help you determine whether the contract is lacking any details. It is also a must to be familiar with its contents because this is how you will be able to tell if the contract is reliable or not. Here are the basic information that must be included in an investment contract.
- Names of participating parties – This refers to the proper and complete names of all the parties involved in the agreement, including other general information. This is how the parties are bound to the contract. Including general information, like age and gender will help ensure that they get the right person and prevent confusing them with somebody else with the same name.
- Addresses of participating parties – The complete business address of the participating parties must also be included to avoid confusion and make sure that they get the right person. This and the above details are necessary, especially when there is a need for any party to conduct a background check on the other party.
- Basic structure of the investment – The basic structure of the investment refers to how the investments will be legally owned. There are mainly four types of investment structure that you need to consider and they are investments in an individual’s name, partnerships, companies and trusts. The type of investment structure must be clearly defined in the investment contract.
- Purpose of the investment – Why is an investment needed and what is it being used on? The details why the investment is needed must be clearly stated in this part of the contract.
- Date of agreement – This refers to the date when all the participating parties agreed to the same provisions of the contract at the date and time. Simply put, this is the date when the contract is signed by the participating parties.
- Signatures of participating parties – The signatures of the participating parties serve as proof or consent that they agree to the provisions stated in the investment contract document. This is how they are fully bound to the contract.
What Is Return on Investment?
A return is expected for every investment done and it is called return on investment on ROI. This return on investment is a performance measure that is used to evaluate how effective an investment by directly measuring how much the amount of return on an investment will be that is based or relative to the cost of the investment. This is how investors are able to determine how much they be able to gain in return for investing in a specific business venture or company. A return on investment is expressed as a percentage or a ratio.
The formula used to calculate return on investment is as follows:
ROI = (Investment gain – Investment cost)/ Investment cost
Investment gain – Refers to how much has been gained by the business or company because of the invested amount.
Investment cost – Refers to the exact amount of the investment or how much the investment cost
What makes a return on investment a popular method for measuring the efficiency of an investment is its simplicity and versatility. The formula used for calculating a return on investment is very simple and easy to understand that is why it is used on as a basic gauge to measure the profitability of a businesses, whether it be on stock investments or investments on real estate transactions.
Aside from being the simplest method of measurement for an investment, a return on investment is also used in evaluating different investment opportunities available, helps in the calculation or comparison of investment returns from previous periods, and serves as a signal to start monitoring the particular investment. The method has been used by many investors because it is not only simple, but it is also effective.
Other related topics you may want to check out can be found on our website. You can browse through articles, like Photography Contract Templates, Free Contract Templates, and Teacher Contract Templates.
Why Are Contracts Important?
Contracts would not be in used up to this day if they weren’t useful and important. There are many reasons why contracts are important and it is wise to know what they are to be able to truly understand and appreciate them. The list below enumerates some of the main reasons that make contracts important.
- Contracts are legally binding. One of the main purpose of having a contract is to bind all the participating parties in it so that they will be obligated to the provisions or the terms and conditions of the contract. This means that the parties must do their part as stated and agreed in the contract or they will face legal consequences. And because it is legally binding, it is enforceable in the court of law. This means that unresolved issues can be brought to court if needed.
- Contracts serves as proof or evidence of a transaction. Written contracts provide a physical copy of a transaction where all the participating parties affix their signatures. This serves as proof that they give their consent to become part of the transaction and are not forced to join in. This way no party can deny or back out from the contract that easily. This helps establish commitment from each participating party.
- Contracts provide a record of the details of a transaction. It is easy to deny something that is not put in writing as no evidence can be shown to support it. Any party can simply claim or deny something without a contract in place. But with a contract, no party can claim or deny anything as a detailed discussion of what has bee agreed are recorded in the contract document.
- Contracts offer security and peace of mind. How does a contract offer security and peace of mind? Well that is because no party can easily back out from a contract once it has been signed because of the specific provisions that govern it. Early termination may be subject to certain amount of compensation or may be dealt with as a violation. This is all depending on the provisions stated in the contract and that has also been agreed on by the participating parties.
- Contracts guarantee confidentiality. One of the main concerns of entities participating in a contract is the confidentiality of the transaction and all the details that has been discussed. The confidentiality clause in a contract defines what information is considered confidential and what information can be disclosed without causing harm to the other party. This way trade secrets and other proprietary information will not be leaked and cannot be used by the participating parties against each other.
- Contracts include initial remedies for violations or breaches. Going directly to court when a violation or breach happens may be very costly and the process may take too long, which could greatly affect the participating parties. To avoid expensive litigation proceedings, every contract has its own set of remedies or resolution to help fix the issue at hand. If the described remedies won’t fix anything, then the issue is then brought to court.
These are mainly the reasons why contracts are important documents on almost all transactions, especially when it comes to money matters, business and long-term transactions. To learn more about contracts, you may check out articles related to the topic. Some examples you will surely find useful are Contracts for the Sale of Goods Samples & Templates, House Sales Contracts Samples & Templates, and Employment Contract Samples & Templates.
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Tips in Making Good Contracts
How can you tell if a contract is good or not? Contracts must be well-written and detailed in order to be considered a good one, aside from having all the essential elements that make it valid. However, it does not really need difficult and flashy words to be considered good or great. It just need to be concise and understandable. You can have that done by checking out the tips below.
- Makes sure that your contract is complete and detailed. It’s troublesome if a contract is lacks certain details as this may be taken or used against you by the other party. If you want to make a good contract you need to start with the basic things and that includes making sure that all the details are complete.
- Use clear, simple and concise words. There are many technical and difficult terms used in a contract and it’s somewhat hard to put them into simple words. A whole page dedicated to providing the definition of terms of all those difficult word can help make the contract understandable.
- Avoid making ambiguous statements. This can cause confusion and misunderstanding so it is best to avoid these kinds of statements in your contract. You want to be understood and not misunderstood and this makes a good contract.
- Follow legal requirements. No matter how good or well-written your contract is, if dos not meet the requirements or does not comply to certain regulations, then it is not good at all. What use would a contact be if it is not accepted by the law? These legal requirements vary depending on factors, like the state laws, the type of contract, and the type of transaction involved.
- Both parties must be made aware of the provisions. A contract is also no good if the participating parties are not aware of all of its provisions. This not only makes the contract useless, but it is deemed invalid as well. Every revision or any change done to the contract must be discussed and agreed on by all of the participating parties.
- It must be doable. If the terms and conditions of a contract are not doable, then it is by any means a bad contract.
- It must be fair for all. A one sided contract is never fair for all. It just means that the parties are forced to join the contract or were tricked in joining it.
- Make sure to proofread and review your work. And in order to make your contract neat and professionally written, make sure to proofread your work to avoid any spelling errors and grammar errors. This makes a good impression and makes the contract more reliable.
We hope that you are able to learn about contracts in this article. Samples and templates can help you better learn about them. To name a few are Security Contract Samples and Templates, Agent Contract Samples and Templates, and Service Contract Samples and Templates.
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