Building a business from scratch is no easy feat. It requires determination, drive and vision, and eventually staff. As you expand, you will find that you have to foster relationships with other organisations, these could include clients, landlords and lenders. To ensure that you and your company are properly protected, it is important to have business contracts drawn up and signed by all parties. There are many situations where you will be grateful that you took the time to put together a contract, here are just a few.
1. For offers of employment
When the time comes that your business needs staff then it is important for both you and them to know what is expected. A letter offering employment could prevent you from liability later down the line and it will ensure they understand their responsibilities, job title, salaries and employee benefits, sickness policy, contract period and any confidentiality clauses. This should be signed and dated by both parties and kept safely. It can be referred to if there are ever any disputes regarding it. A well-drawn out contract gives security to both the employee and employer.
2. To ensure confidentiality
Employees and prospective clients often have access to sensitive company information. Employees need access to it to do their jobs and clients or other companies you are working with might need access to it in order to make decisions about investing in your company or when deciding whether to partner with you on a project. Allowing them access to this information without a contract is risky, and could lead to all kinds of issues. As such, it is best to get anyone who has access to your businesses information to sign a confidentiality agreement/ non-disclosure agreement. This should detail time periods (where relevant), exclusions and action that will be taken should the other party attempt to disclose information. It should be clear and contain all relevant clauses. This agreement should be signed and dated by both parties before any information is shared.
3.When taking on a lease
Where a business premises or storage facility is required for your business, it is pretty imperative that you know what you are signing up for. The space you run your business from can be one of the biggest costs so before signing anything, ensure you are happy with the contract. Make sure the lease is long enough to suit your requirements, the price is affordable after all your expenses, the landlords’ obligations are clear, the premises suits your business needs and check the conditions on subletting.
4. When providing service or sales to customers or clients
If your business provides a service then it is a good idea to have a services contract. This will detail your responsibilities to the client and the terms and conditions of your services. This can protect your company against liability and any misunderstanding that may arise.
Similarly if you sell products with a high price tag then it is definitely worth drawing up a sales contract. Companies that provide bespoke products or one offs might find it easier to tailor each contract to suit the individual sale. However, it can be an invoice stipulating price, taxes (where relevant), payment terms, warranties and disclaimers.
5. Letters of Intent
A letter of an intent is a good way to secure a deal. It allows all parties involved to get a loose deal on the main details and gives them the opportunity to work towards making definitive legal agreements.
Be cautious about what you declare to be non-binding and binding in the letter. Generally, Letters of Intent aren’t binding. They usually just work to express in writing that all involved parties have an idea of the arrangement they want and it allows them to discuss it and develop it further. However, they can be binding depending on how they are worded so be careful what you say in them.
To ensure all contracts are correct, advantageous and legal, it is worth seeking legal advice from a relevant attorney.
Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.
