For those businesses and start-ups that have just set up their companies or are perhaps still finding their feet, it’s important to be aware of the contracts that are most likely needed at some point. Having an understanding and an awareness of these contracts is going to help you put the right ones in place and to reduce the risk of you facing a legal battle or problems within your company.
It’s something you want to know inside and out, even if you’re perhaps outsourcing your legal requirements to another company. Having a grasp of the basics can really help you to avoid getting yourself into any unwanted mess at the start of your company’s life. Here are some of the most important and general contracts that you need to know about.
Hiring Employees
When you hire an employee, you will need to make it official in the form of a letter that you’ll send to the employee’s address or hand to them personally. This is also something you’ll keep for the record. Along with that, you’ll also be required to give them a contract that outlines everything to do with their rights as an employee and what you are offering in return.
An employee contract and offer letter is a must because you want to have official documentation that both you and the employee have signed and agreed to. If you’ve not got a full understanding of what to include, it should have at the least the following:
- The offer of the job in question and the job’s responsibilities.
- Salary and benefits that the employee shall receive.
- The termination of the contract in details relating to either the employee terminating it or the employer.
- The employee will also sign a confidentiality and invention assignment agreement.
- That the letter/contract is signed and dated by both parties to show agreement in what’s been outlined.
You might want to include more depending on the nature of the job but the offer letter doesn’t need to be an extensive document. The contract is the document that you can go into more detail with. Make sure that you allow the employee to read over the offer letter and contract but to ensure that this document has been signed and dated before they start their job.
By doing all of this before their first day in the workplace, you’re securing yourself as an employer but also the employee also has their own back covered too. As always, if you find yourself struggling with the creation of these agreements, it’s always good to consult the experts.
Service & Sales Contracts
There can be contacts that vary depending on whether you supply a service or if you sell goods. A services contract is often referred to as an agreement for professional services but can also be labeled as many other things. This agreement will provide those terms and conditions that outline your responsibilities and liabilities specifically.
You want to clearly tell the person receiving the services exactly where your responsibility and liability start and end. That way, you’re covering yourself should anything go wrong and it wasn’t something that was a fault of yours. Some people can end up taking liberties, remember that.
For sales contracts, they’re usually laid out in the form of an invoice, or it might be tailored specifically to what’s being sold. It’s good to refer to examples of both these contracts but to make them your own. The key terms that are usually in the sales contract are the price, any mention of price adjustments if varying factors dictate it.
You will also include the payment and credit terms and any warranties that you have available.
It’s also worth mentioning that there are different types like a unilateral vs bilateral contract where it may affect your legal standpoint or even the deal that you have on the table. Knowing these can offer a lot more confidence and understanding of which contract to offer when it comes to your business or start-up.
Confidentiality Agreements
Confidentiality can often be critical in business, and when you put these confidentiality agreements in place, it can help protect your business. Whether you’re doing an exclusive deal or perhaps have a new product or service under wraps that could be huge and is at risk of being stolen, then confidentiality is key.
You might also be in a situation where you are dealing with high-profile individuals and so having these confidentiality agreements in place is essential to protect your client’s wishes. If those agreements aren’t in place, it could spoil the reputation of your business if any information was leaked. You’ve also then got no authentic grounds to take action.
One confidentiality agreement contract is likely one you’ll give your employee to sign. This means that you’re protecting whatever you have and that might be easily accessible to an employee.
Making sure they understand the implications of giving away data or confidential information is critical to helping keep these projects and ideas under wraps. Should the employee break this agreement, then you might have conditions in which you could release the employee from their position if you saw fit.
For general confidentiality agreements outside of the business, there may be deals that you are wanting to do with other parties. Whether that’s investing in your company or perhaps collaborating on a service or product. Whatever the case, having a confidentiality agreement or an NDA (non-disclosure agreement), helps keep the usage of the information limited. You want to enter into the agreement before disclosing any of this information, however.
So what does a good NDA look like? Well, be sure to include the recipient’s confidentiality obligations and responsibilities regarding the information. There should also be information on how long this confidentiality obligation lasts and the limits that this information has when it comes to using it.
Regardless of whether you’re a small start-up or a big company, this agreement is something you definitely want in place. You never know what you might be handled confidentially, so be wary of anything you go into that could involve confidential data and information.
Loan Agreements
There are plenty of businesses out there that have had to take out loans in order to fund their business from scratch or perhaps to invest it into projects. Not every business will have that disposable income to spend on something that could potentially make them a lot of money. That’s why bank loans or lenders can offer these businesses the opportunity to take on that investment where necessary.
When it comes to a loan agreement, the contract or standard form used tends to be a one-sided document that is mostly in favor of the lender and not equally for both parties involved. If you’re taking a loan yourself as a business, then you’ll want to make sure the form has the following:
- Cost of the loan in total.
- Payment outlines in regards to the schedule.
- Flexibility on the use of the loan and it’s payback.
- Any warranties or representations of you as the borrower.
- The right to trigger and cure defaults.
If you’re a business that’s lending to others, then it’s also worth noting down this information when it comes to making your own agreements. A loan is a risk and it’s money that either you can either afford to lose (if you’re the lender) or can afford to pay back if you’re borrowing.
The same rule applies to businesses as it does to sole traders and the everyday person. Don’t borrow more than you can afford and make sure you have the right agreement in place so that you can pay this money back as soon as possible.
Stock Purchase Agreements
As a business, there might be times where you want to make a number of investments both in relation to your business and perhaps not. With that being said, it’s essential that you’re putting yourself into the right investment opportunities but that you’ve also got the right agreements in place.
It’s important for growing businesses and start-ups to raise capital to fund their business and so it might be that you sell stock as an investment opportunity for anyone interested in your company.
These agreements can often be quite lengthy on average and so it depends on the complexity of the deal that you’re arranging. It’s important though that you really think hard about what you’re offering especially as you’re selling stocks of your business.
You should think about the type of stock you’re selling, the price, and the number of shares available. Any representations and warranties for the investor and for you as a company.
With any startups and business contracts, it’s good to know which ones you need to have readily available. The more you can prepare for, the less work it gives you as a business when these opportunities come along. Whether that’s hiring a new employee or signing an exclusive deal under an NDA, it’s good to have legal and binding contracts in place.