8 Most Common Types of Business Contracts

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No matter the line of business you are in, you have to be aware of the fact that you will deal with plenty of contracts for your company to function properly and according to the law. With that in mind, let’s go over the most common types of agreements you can encounter.

Partnership agreement

There are different kinds of general business contracts that you will have to handle. One of them is a partnership agreement. A well-worded partnership agreement will determine the obligations of business partners and the relationship between them. It will also specify each partner’s capital contribution, ownership interest, the distribution of profits and losses, and responsibilities as well as a clause for partnership dissolution. Having such a contract in place will protect both sides, and if any changes need to be made, it’s best to have them in writing.

Employment agreement

Then, even if you start only on your own, you might expand over time and hire some workers to help you out. That means that you will need to use employment agreements. This will cover your relationship with the employee and offer you both legal protection. Here, you should specify how long the contract is for, what the conditions are, how big the salary is, the working hours, and various other details like the salary bonuses and reasons for termination. There are three types of this contract: general employment contract, independent contractor agreement, and non-compete agreement, so decide which will work for you best.

Non-disclosure agreement

Regardless of whether you’re asked to sign one or are asking an employee to do so, you need to know what a non-disclosure agreement is. An NDA is a legally binding contract that ensures no confidential information or material is shared with third parties. That should help your business grow without worrying about others stealing your intellectual property.

Indemnity agreement

Another type of contract you can encounter is the indemnity agreement. This is typically used to protect either side from legal damages should something bad happen, meaning no harm is done. It is most commonly used in high-risk businesses, the shipping industry, and construction projects. In case you run a construction business in Australia, you can always look to construction lawyers in Sydney to help you better understand what this contract entails and whether you could benefit from it.

Property and equipment lease

In case you’ve decided that renting makes more sense budget-wise in the beginning, you should also learn more about property and equipment lease contracts. These are used to agree on the terms of the lease for your commercial property or the pieces of equipment you will be using regularly. Everything from the cost to the conditions should be covered.

Bill of sale

If your company makes plenty of sales, a bill of sale contract is something you cannot afford to overlook. No matter if you sell houses or vehicles, you want to use these contracts to prove that the property has new ownership. Both the seller and the buyer need to sign, and it should include the date, price, and other specific details.

Licensing contract

A licensing contract is another type of agreement you might encounter, no matter if you’re monetizing your intellectual property or licensing someone else’s. By using this contract, you can make money from your inventions by allowing others to use them or you can make the most of something other people created for a fee.

Promissory note

Lastly, we should mention the promissory note. This contract is a legal type of IOU, which means that it can be used if someone borrows money from you or vice versa. It is sometimes called a note payable and states the terms of the loan and repayment, including interest rates and penalties.

There are many types of contracts that you should familiarize yourself with if you plan on running a business. Consulting with professionals to understand each type better is always recommended.