Common Types of Business Contracts
If you are a small business owner, it is likely that you will encounter several different types of business contracts. It is impossible to memorize every piece of information located in every contract you may utilize. However, understanding what each of these contracts offers is extremely useful. Below is an outline of the three most common types of contracts: general business contracts, sales-related contracts, and employment contracts. While this is not an all-encompassing list, the contracts discussed below are by far the most utilized business contracts.
General Business Contracts
General business contracts will focus on issues such as how your company is structured, stakeholder definitions, and contracts that can help protect your company. Below are the most common general business contracts.
- Partnership Agreement: A partnership agreement will state clearly and exactly what the relationship is between business partners including their specific obligations and contributions to the business.
- Indemnity Agreement: Indemnity agreements refer to a type of contract where one entity agrees to hold another entity harmless for damages resulting from a specific contract. For example, a personal trainer may ask their clients to sign an indemnity agreement. This ensures that if the client gets hurt while exercising, they cannot sue the personal trainer for damages.
- Nondisclosure Agreement: A non-disclosure agreement is a contract that binds two or more parties from sharing any sensitive information during the length of the partnership, employment. Thus, a non-disclosure agreement protects the confidential business or personal information from being disclosed to any other party while giving one or both entities ways to receive damages in the case that the agreement is breached.
- Property and Equipment Lease: A property and equipment lease states the terms and conditions for a lease of a piece of property or equipment. This lease will typically include information such as the initial deposits, terms, monthly payments, and maintenance agreements.
Sales contracts normally focus on the purchase and sale of items, services, and property. Further, these documents will also state how the legal agreement for the transfer of the title when necessary. The most common types of sales contracts include the following.
- Bill of Sale: A bill of sale is a common contract that transfers a property title and is evidence that two parties did reach an agreement. This document is fairly versatile. However, it is most common to transfer the title of a vehicle from one person to another.
- Purchase Order: Once a business signs a purchase order, an entity is committing to purchase the item at a certain quantity at an agreed-upon price point. This document will also lay out the payment terms, delivery date, and other important information.
- Security Agreement: Borrowers use this sales contract to secure a loan by pledging a piece of property or another item as collateral in the event that the borrower defaults on the loan.
One of the easiest ways to protect your business against legal claims is to document every aspect of employment relationships. Common employment contracts include the following documents.
- General Employment Contract: A general employment contract will state the relationship between employer and employee. This can include employee compensation, benefits, duration, grounds for termination, and any other industry-specific issues.
- Noncompete Agreement: A non-compete agreement simply states a period of time and geographic range that an employee must abide by before working for a competing company once they leave your business.
- Independent Contractor Agreement: If you choose to hire someone for a specific project or to complete a particular service, you will likely want to utilize an independent contractor agreement. This agreement will lay out the terms and conditions for employment similar to that of a general employment contract. One important note is that the federal government has strict guidelines for who can be considered a general contractor. So check these rules to ensure you will not encounter legal trouble later on.
One of the above contracts will typically cover most of your business relationships. As each of these contracts covers a different part of business operations, they vary in complexity and length. For example, a bill of sale agreement is straightforward while a partnership agreement can be more complex. If you are unsure about any material presented in the contracts above, it is vital that you hire an attorney. This entity can draft and review these agreements to keep you out of legal trouble.
Contact Our DC Law Office for More Information
Finally, for more on common types of business contracts, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding business law, check out our blog.