Regardless of the type of business you run, having the right contracts in place is an essential element to achieving success. But what type of contracts do you need to ensure your business runs smoothly and can meet consumer demands and internal growth targets? This article will answer this crucial question.
What are the essential contracts every business needs?
Below are several contracts your business should have in place.
Employment contracts
Although it is not a legal requirement to provide your employees with a written employment contract (you must provide a Written Statement of Employment Particulars within two months of an employee starting work), a signed agreement setting out matters such as holiday pay, bonuses, and how grievances will be resolved can help you avoid future claims in the Employment Tribunal. Increasingly, employment contracts can also set out how information on the company is shared in personal social media and also comply with data privacy laws.
Terms and conditions
Your terms and conditions set out how you conduct your business. They state how your products and services will be delivered, your cancellation and renewal policies, how and when you invoice and much more. You would be surprised how many businesses do not keep their T&Cs up to date, or rely upon examples downloaded from the Internet, not tailored for their business and open up issues down the line.
NDA / Confidentiality Agreements
There are times you have to share confidential information with third parties. It is now a matter of course for a NDA / Confidentiality Agreement to be used, stating that certain information provided is to be kept secret and if the recipient breaches confidentiality, you can claim compensation.
Shareholder or Partnership Agreements
If your business is set up as a limited company or partnership it is essential to have agreements in place that dictate how the organisation will be owned and controlled. A Shareholder Agreement states, among other things, how dividends will be paid and the voting rights attached to each type of share. Partnership Agreements cover matters such as the duties and responsibilities of each partner and what happens if one partner dies or chooses to leave the partnership.
Intellectual Property Assignment Agreement
Intellectual property has become a valuable asset. If an employee or founder has created intellectual property before joining the business, having an Intellectual Property Assignment Agreement in place will protect you from a potential legal challenge if a dispute arises over ownership.
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What are the risks of not having legally binding contracts in place?
Not having the necessary written contracts in place leaves your business vulnerable to disputes and potential litigation. Not only are these costly in terms of money, but they also divert crucial resources away from achieving your targets and ambitions.
In situations where you do not have agreements with your suppliers, there is no legal obligation for them to deliver essential supplies on time, which could result in you being unable to fill orders. And in the case of Shareholder and Partnership Agreements, failure to have the former where there is an even number of shareholder votes means you run the risk of a deadlock situation. Not having a Partnership Agreement can result in the partnership having to be dissolved and the business closed because one partner decides to resign from the partnership.
Where’s the best place to get your essential contracts?
Although you can download many essential business contracts from the Internet, you need to ask yourself if it is worth the risk of not getting agreements tailored for your specific needs. Further, if you have a contract you need to sign, the chances are the other side is using professional legal advice - so you need to protect your interests.
Professional legal advice is a sound investment. A good Commercial Solicitor will ask you questions about your business and market sector and offer advice on many aspects of your agreements that you may not have thought of. Furthermore, they will review or draft the contract to your specifications, providing you extra protection from potential disputes and legal claims.
To ensure you have the essential contracts in place for your business:
- Think about the type of contracts you need. For example, if you license software to other organisations, you need to have a Software Agreement in place. Businesses that instruct third parties to process personal data need to ensure they have agreements that state that the processor must fully comply with the GDPR and Data Protection Act 2018.
- Discuss your contract requirements with an experienced Commercial Solicitor and have them draft the documents for you. Although this requires an initial investment, it can save you time and money in the long term by protecting you from potential legal disputes.
- Make sure you update your contracts if your business and/or regulatory requirements change.
- If you are being asked to sign a contract, get it reviewed by a Solicitor and avoid issues arising down the line
Investing in getting your contracts right for your business means you can be confident that your best interests are properly protected.
Get legal assistance from LawBite
We understand how daunting contract law can be to navigate, but our contract review service is here to help. Our expert contract lawyers can draft, review, and make sure that all your necessary points are covered in a contract. To learn more, book a free 15-minute consultation with one of our lawyers or give us a call on 020 3808 8314. Let us help you secure the best contract possible.
Additional useful information
- What is a contract of employment?
- What are the Terms and Conditions of an Employment Contract?
- What should be included in a contract of employment?
- Contract Dispute Resolution - Get ahead of your counterpart
- Importance of Reviewing Commercial Contracts in the times of Coronavirus and Brexit
- Commercial Lease Agreements: All you need to know
- Why Shareholder Agreements Are Important?
- Free template: Confidentiality Agreement / NDA [Mutual]
- How To Dissolve A Business Partnership
