Insight

Different Types of Business Contracts

If you're a business owner or looking at starting a new business, you'll need to know the different types of business contracts required by law.

Different Types of Business Contracts
DG

David Goldberg

May 27, 2022 08:00 AM

These documents serve as legal agreements between two or more parties and can help protect your interests in various ways.

In addition, being in the know on this aspect of a business will help you make informed decisions. You'll also be made aware of any potential liabilities that could come with using certain types of contracts.

As with anything related to legal matters, it's always best to consult with an attorney to ensure you're fully protected.

Business contracts can be divided into three categories:

  • Employment contracts
  • Sales-related contracts
  • General business contracts

Employment Contracts

When you hire people to provide services to your business, you'll need to put employment contracts in place. These documents detail the terms which both parties are bound to fulfill. After all, this type of relationship is not as simple as “they work, you pay.”

It's important to have hiring agreements in writing to avoid confusion regarding expectations from each employee. A written contract can also help prevent potential legal problems down the road.

Below are some of the most common types of employment contracts:

General Employment Contract

This is the most basic type of employment contract. It will outline the duties and responsibilities of the employee, and their compensation. It may also include other details such as the duration of the contract, employee benefits, and grounds for termination.

Freelance Contract Agreement

Also known as an independent contractor agreement, this type of contract is used when hiring someone to provide services on a non-permanent, part-time basis. It outlines the freelancer’s scope of work and the corresponding compensation.

Since independent contractors are not considered employees, they are not entitled to the same protections and benefits enjoyed by full-time and part-time employees.

Non-Compete Agreement

A non-compete agreement is used to prevent employees from going to work for your competitor when they leave your company. Basically, it informs employees about actions they cannot carry out after their employment has ended.

Non-compete agreements can be difficult to enforce, so it's advisable to draft a detailed contract that includes the following:

  • Period covered (maximum of one year as the law provides)
  • Geographical region (never beyond its borders)
  • A short list of competitors the employee cannot work for

Sales Contracts

If you're in the business of selling goods or services, sales contracts are crucial. These agreements fully encompass the terms of each sale, including prices, duties, and modes of transfer.

Below are some of the most common types of sales contracts:

Sales Agreement

A sales agreement is used to document the details of a sale. It includes the description of the goods or services, the date of delivery, and payment terms. Other information specific to your industry, such as spoilage and expiration, may also be added.

Purchase Order

When you deal with suppliers, they would most likely require a purchase order from you to make the transaction official. This document protects both you and your supplier. It guarantees on-time delivery and payment.

Bill of Sale

A bill of sale is used to document the sale of goods. It will include details such as the description of the goods, the price paid, and the date of sale. It also includes the terms of sale of a property or service.

Bill of Lading

This type of contract is used to document the transportation of goods. It will include details such as the description of the goods, the destination of the shipment, and the date of delivery.

Statement of Work

A statement of work is used to document the scope of work to be performed by a third-party contractor. It should include the job description and scope, the dates of performance, and the compensation agreed on.

Warranty

A warranty assures your customers of a high-quality product and safeguards them from any danger due to its use. It specifies the period and parts covered as well as the terms of repairs and replacement.

General Business Contracts

In addition to the ones listed above, there are several other contracts commonly used in business. Here are a few examples:

Nondisclosure Agreement (NDA)

An NDA is essential in protecting a company’s confidential information, such as research data, recipes, finances, and marketing strategies. It outlines the aspects that can and cannot be shared, and the consequences of breaching the agreement.

Indemnity Agreement

An indemnity agreement is used to protect one party from liability. It enumerates the limitations of the said party’s responsibilities in any untoward incident.

Also called liability waivers, these bonds are often employed in high-risk activities like skydiving, rock climbing, and bungee jumping. In essence, the indemnity agreement states that you accept the dangers of the activity and agree not to sue the company if you're hurt while doing it.

Partnership Agreement

A partnership agreement documents the terms of owning and operating a business by two parties. It includes the roles and responsibilities of each partner, the percentage of ownership, and how profits will be divided.

Franchise Agreement

This contract is between a franchisor and a franchisee. The document states the territorial radius limit of the franchisee’s operations, the exclusivity of the franchise, and the period covered by the agreement.

Settlement Agreement

A settlement agreement is used by people and entities involved in a legal dispute to avoid drawn-out court cases and mutually benefit from the time and money saved. Your attorney will ensure that the settlement amount, date of payment, and all other conditions are met.

Assignment of Contract

An unavoidable circumstance while running a business is the inability of a supplier or service provider to continue the work they committed to doing for you. An assignment of contract can save the day by allowing them to transfer your agreement to another party and ensure continuity in operations.

Protecting Your Business With Contracts

Various contracts are utilized in a business setting. While some are more common than others, understanding the purpose of each can benefit your business.

If you're not sure which type of contract is right for your enterprise, or if you need help drafting one, you should contact a lawyer specializing in business law. The lawyers at GLG LLP can help you navigate the world of business contracts and protect your interests.

For more information please visit GLG LLP Business Lawyers website at https://glgllp.ca/.

This blog was published with the help of dNovo Group, a digital marketing agency for lawyers (https://dnovogroup.com/).

Related Articles

Freedom to Compete


by Alyson M. St. Pierre and Ashley C. Pack

Recent movement at the federal level regarding management-labor relations mean changes to enforcement of noncompete agreements and other covenants could be imminent.

Woman in front of open blue door

Compelled to Compete


by Ashish Mahendru

Courts and legislatures—and now the White House—are taking an increasingly dim view of noncompete employment agreements, a development the pandemic has quickened. What can employers do to protect their confidential information?

Protection for Employers Beyond Noncompetes

Biden Targets Non-Competes, But They Still Have Their Place


by John Ettorre

Limitations on non-compete agreements are increasing, aided by an executive order by President Biden in July.

Biden Targets Non-Compete Agreements

Know This Contract Clause During the COVID-19 Pandemic


by Roy D. Oppenheim

Force Majeure clauses are common in most contracts and can prove to be invaluable when determining whether one party’s performance is truly outside of that party’s control.

What is Force Majeure?

Trending Articles

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

2021 Best Lawyers: The Global Issue


by Best Lawyers

The 2021 Global Issue features top legal talent from the most recent editions of Best Lawyers and Best Lawyers: Ones to Watch worldwide.

2021 Best Lawyers: The Global Issue

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

The U.S. Best Lawyers Voting Season Is Open


by Best Lawyers

The voting season for the 31st edition of The Best Lawyers in America® and the 5th edition of Best Lawyers: Ones to Watch® in America is officially underway, and we are offering some helpful advice to this year’s voters.

Golden figures of people standing on blue surface connected by white lines

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Inflation Escalation


by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

IN PARTNERSHIP

Bentley & More LLP: Beacon of Hope


by Bentley & More

With a unique blend of expertise in trial advocacy and workers’ compensation, Bentley & More LLP has established itself as a beacon of hope for injured workers.

Bentley & More LLP: Beacon of Hope for Injured Employees

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

8 Different Types of Criminal Defenses in Law


by Best Lawyers

Learn about the different types of criminal defenses available in law, including innocence, self-defense, insanity and more. Protect your rights today.

Silver handcuffs laying on finger printed papers