Whether you’re starting a small business or a start-up, one of the first things you need to do is put together contract agreements for the products or services you plan to offer. A contract agreement is a legally binding document that outlines the terms of a business relationship between two parties. In other words, it sets forth the expectations, responsibilities, and obligations of both sides to avoid misunderstandings or disputes down the line.
If you’re unsure where to start, don’t worry—we’ve covered you. In this blog post, we’ll walk you through everything you need to know about preparing contract agreements for your start-up business.
Choose the Right Type of Agreement
There are different types of contract agreements for different types of business relationships. The most common type of agreement is a service agreement, which outlines the terms of service provided by one party (usually an individual or a company) to another.
Other common types of contract agreements include:
- Employment agreements — Protect both the employer and the employee and usually record their relationship’s rules, rights, and responsibilities.
- Independent contractor agreements — Establish an independent contract relationship between a business and an individual who provides services to the business.
- Nondisclosure agreement (NDA) or confidentiality agreement (CA) — This contract protects confidential information from being disclosed to third parties.
- Partnership agreements — Used to establish a partnership between two or more businesses and usually outline each partner’s responsibilities, ownership stake, and share of profits and losses.
- Sales contracts — Used when one party sells goods or services to another party.
- Lease agreements — Used when one party leases the property from another party.
There are many other contract agreements, but these are some of the most common. You’ll likely need to use one or more of these contract agreements when starting a business. Choosing the right type of agreement for your specific needs is important. Otherwise, you could end up with an invalid or unenforceable contract.
Include Essential Elements
Once you’ve chosen the right type of agreement, it’s time to start drafting your contract. But before you get too far ahead of yourself, certain elements must be included in every contract agreement for it to be valid:
- An identification of the parties: This should include the full legal names and addresses of both parties involved in the agreement.
- An outline of the product or service provided: Be as specific as possible when describing what is provided. This will help avoid any misunderstanding later on.
- The duration of the agreement: Include date ranges or milestones that indicate when the agreement begins and ends. This is especially important for time-sensitive products or services.
- The price and payment terms: If there’s a fee associated with the product or service being provided, include how much it is and when/how it should be paid.
- Any other relevant details: If any other important details need to be included in the agreement (e.g., confidentiality clauses, warranty information, etc.), be sure to add them.
Get Everything in Writing
It’s important to get all contract agreements in writing, even if you’re dealing with someone you know and trust. A written contract provides clarity for all parties involved and can help prevent misunderstandings or disputes. It also gives both.
Many templates and examples are available online if you’re unsure how to draft a contract agreement. Simply search for the type of contract you need and use it as a guide. Just be sure to customize it to fit your specific needs.
While contract agreements are important for all businesses, they’re especially critical for start-ups. So, be sure to take the time to prepare contract agreements for your start-up business. It could save you time, money, and headaches down the road.
Make Sure it’s Legally Binding
Once you’ve drafted your contract agreement, it’s important to have it reviewed by a lawyer to ensure that it’s legally binding. Hiring a contract lawyer to look over your contract is usually a smart idea. It’s especially vital if you’re unfamiliar with the law or if the agreement concerns a high-value product or service. They’ll be able to detect any legal issues with your contract and advise you on how to fix them. In addition, if required, they may assist you in negotiating the terms of your contract.
Business contracts must comply with local laws and rules. An attorney might assist you in ensuring that all of your business agreements adhere to applicable legislation and regulations in your sector.
A contract agreement is a vital part of any business relationship—especially when you’re just starting. Including essential elements and having your contract reviewed by a lawyer can ensure that your interests are protected and avoid any misunderstandings down the line.