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3 types of contracts that many new businesses need to draft

On Behalf of | May 30, 2024 | Business Law

Contracts are an important element of running a successful business. Some people go so far as to say that contracts are the lifeblood of modern businesses. Without formal agreements, companies might struggle to acquire the staffing that they require, the facilities they need and the materials necessary to produce goods or provide services for the public.

Despite how important contracts are, executives and business owners sometimes make the mistake of using basic, boilerplate documents that they may have sourced on the internet. The documents they download might potentially work better in another state or may include outdated language that makes those contracts unenforceable in civil court.

The best protection typically comes from creating custom contracts for unique business circumstances. The following are some of the most common contracts that organizations may need to operate effectively.

Employment contracts

With the exception of very small businesses and professional practices, most organizations need the help of professionals to ensure continued operations. Employment contracts help clarify exactly what a company expects a worker to do in return for compensation. The contract also outlines what obligations the organization has to the employee. The wrong restrictive covenants or unenforceable terms could lead to disputes between employees and the companies that hire them. Customizing each employment contract is ideal for businesses trying to reduce the risk that comes with new hires.

Business-to-business contracts

Frequently, one company may rely on another organization for resources that are necessary for daily operations. Companies might rely on a service provider for payroll support or information technology assistance. Organizations may also negotiate arrangements with vendors that deliver materials and goods on a routine basis. Many businesses also require commercial leases that they sign with landlords to maintain an office space, retail shop or manufacturing facility. Contracts between two businesses can be particularly lengthy and complex documents, and establishing custom terms within that agreement can be crucial for the protection of an organization.

Client or customer contracts

Maybe the business in question is an entertainment venue, like a trampoline park. It may be necessary to draft waivers for customers to sign to protect the company from risk. Maybe the company offers services, such as roofing repairs. It may be necessary to have contracts outlining the timeline for work and the payment arrangements for the customer. Contracts can help deter non-payment and may help protect companies from customer lawsuits

Taking the time to establish basic contracts for a company’s recurring needs can be as important as customizing the terms of a contract for each new employee, vendor or customer. Executives and business owners who understand the importance of contracts can better use these tools to protect the organizations that they help operate.