Anytime you enter into a business relationship (e.g. hiring web designers, hiring employees/interns, selling products or services to customers, working with another company, hosting an event or giveaway etc.) you need a contract. A clearly drafted contract will serve as the instruction book for your business relationship, and can capture even the smallest details that need to be included.
Without the proper contracts in place, you are leaving your business (and yourself) wide open for potential hassles that a carefully drafted contract could eliminate or at least prevent.
A carefully drafted contract will do 3 important things:
(1) help ensure both parties are comfortable with their duties and obligations;
(2) make clear the intentions, requirements, costs and expectations each party has of the other party; and
(3) include a remedy within the contract in the event there is a breach such as non-payment (what I like to call “when the shit hits the fan”) which could save time and money down the road by having this addressed upfront.
What should be in my business contracts?
You don’t need to speak legalese to create a valid business contract. In fact, the contrary often holds true, as the best business contracts are written in everyday language and understood by all. There are a few basic fundamentals that every business contract should include such as:
- The date of the contract;
- The names of all parties or entities involved;
- Payment amounts and due dates;
- Contract expiration dates;
- An escape plan/termination clauses to include information about what to do if either party needs to break the contract; and
- Potential damages for breach of contract, missed deadlines or incomplete services
I’m just starting out and not sure what contracts I need to have.
You may be wondering which contracts you need in your business to get going on the right track. It really depends on the nature of the work you are doing in your business, but there are 3 in particular you should have on deck and ready to go.
No.1: Independent Contractor Agreement – If you are thinking about hiring help in your business, an Independent Contractor Agreement is a must-have. This agreement allows for peace of mind between the primary and secondary individuals in a business contractual relationship such an assistant, graphic designer, or consultant you plan to work with.
No.2: Non-Disclosure Agreement – A Non-Disclosure Agreement (also known as a Confidentiality Agreement) enforces the confidential relationship between two parties that wish to share information, knowledge or information with one another for particular purposes. This will ensure that important information about your business will be protected before you share it with third parties.
No.3: Intern Agreement – If you are a business owner who regularly hires interns to work in your business, you need to have an Intern Agreement in place. There are rules about what qualifies for a legal unpaid internship program so you want to ensure you understand the requirements + clearly document the terms of the internship program in a contract.
These are just a few of the common agreements I work with clients on, especially those that are just starting out. In short, business contracts are unavoidable and are truly a must-have in your business. Working with a business lawyer is a practical next step to ensure that you have the right contracts in place and that your interests will be protected.