A Detailed Guide on Business Contracts Agreements

A business contract, also known as a legal contract, is a legally binding agreement that binds two or more parties or entities engaging in business. This written contract is enforceable in a civil court to align with the contract law.

According to the law, a legally enforceable contract is a valid contract. This document is crucial as it sets out the terms and conditions, rights, duties, and obligations of both parties to avoid misunderstandings or disputes in the future.

Creating a business contract requires an understanding of the basics of contract law. You must also consult with a business contract lawyer to ensure that your agreement is legally binding and can be enforced in court.

Basics of Business Contracts and Agreements

Business contracts and agreements are vital for all types of businesses, whether small businesses, start-ups, or large companies. These types of contracts have been in existence since time immemorial.

Let us look at the fundamentals of business contracts. These basics ensure that legal agreements are valid in court.

There are different types of legal contracts that you will use during your normal business operations. Familiarising yourself with the necessary business documents and agreements will help you run your business smoothly.

General Business Contract

General business contracts are legal agreements related to starting and running businesses. They cover the structure of your business and the protection of stakeholders. They include:

• Partnership agreement – This mutual agreement clearly outlines business relationships between partners, their obligations, and contributions to the business.
• Indemnity agreement – It is commonly known as a hold harmless or no-fault agreement. The agreement involves two parties, where one party agrees to indemnify another individual or other parties for losses or damages that may result from a contract.
• Nondisclosure agreement – It is a written legal agreement where the parties declare that they will not share confidential trade information with any other party outside the organization.
• Property and equipment lease – An agreement where the property owner or equipment allows a lessee to use the property or equipment for a set period. The lessor receives payment in return. Small business owners can benefit from this agreement as they will use equipment and pay later.
• Franchise agreement – An agreement where a franchisor licenses its intellectual property, business name, branding, and all the rights to sell goods and services and licenses to another business.
• Settlement agreement – This is a binding business contract that settles legal issues without filing a lawsuit in court.

Employment Agreement

Hiring new staff can create liability issues for your company. Employment agreements give you control.

• General employment contract – It is an agreement that outlines the relationship between an employee and employer, job descriptions, and any issues related to the work environment.
• Independent contractor agreement – This is also known as the freelance contract agreement. It outlines the scope of work, payment obligations, and independent contractors’ expectations. You are not responsible for tax obligations; therefore, you can’t put restrictions on freelancers working with other businesses. What matters is that the contractors finish the job you assign them on time.
• Non-compete agreement – It is a contract that forbids your previous employee from working with your competitors for a specific period. The contract should be clear on the timespan of a non-compete, the geographical location it extends to, and a list of competitors.

Sales Agreements

A sales agreement explains issues around the sale of goods, services, and property. The contract also outlines how to transfer a title. They include:

• Bill of sale – A legal document that shows two parties have agreed on the terms of sale of a commodity or service.
• Bill of lading – A legal document for two parties shipping freight that details the type of goods, quantity, and destination.
• Purchase order – A legally binding contract that commits a business owner to buy an item at the agreed purchase price. A purchase order also outlines payment terms and delivery dates.
• Statement of work – The statement of work outlines factors like scope of work, location, terms of payment, and task expectations.
• Warranty – A guarantee that the product seller will replace or repair their product in case of damage.

The different types of contracts listed above are the most common to encounter as you run your business. Each of them is detailed and includes legal information. Therefore, hiring a business contract lawyer with years of experience in contract law is recommended.

Working with an attorney or law firm will help you understand the legal repercussions that you may face with failure to honor such agreements.

PUT IT IN WRITING! is a phrase you need to remember whenever you want to get into a business contract.

It is usual for people to make business deals through word of mouth and seal it with a firm handshake. Handshakes work until everything goes wrong and crumbles. The first question your attorney will ask is, did you put it in writing?

A written agreement provides tangible evidence for the jury and court during litigation. Memories fade away, but words in writing will never change. A written business agreement will give you solace when it is your word against the other party.

Written business agreements help avoid litigation. All the terms and conditions of your agreement are documented. Therefore, if there is a dispute between parties, refer to the document to get the facts right. This will clear any doubts and misunderstandings and save considerable time and money you would have spent in court.