Many entrepreneurs rely on oral agreements or a gentleman’s handshake when doing business. Though these may be considered an honourable way to do business, not everyone is honourable. Therefore it is imperative in business to have these five basic agreements in place. By having these agreements in place you will have recourse should your agreement go sour and your rights could be protected to some extent.
When creating an agreement there are four essential parts of any agreement. They are:
- An offer,
- An acceptance of the offer,
- An intention to create a legal relationship, and
- A consideration which is usually money.
With these four parts in your agreement, you are well on your way to creating a legally binding document. It is also crucial to get a professional to review your agreements to ensure that they will be valid in a court of law.
Here are five key points to remember when creating a legal agreement:
- Write it down. It is critical that you have the agreement written down and it has been signed by both parties.
- Identify the parties accurately. This is often an area overlooked by businessmen but it is important to have the correct legal names of the parties involved in the agreement so you know who is responsible for the obligations of the contract. With business names, you need to ensure that they are followed by Pty (LTD) if they are a private company.
- Understand the contract. You should always read through a written agreement carefully. If you don’t understand what is written in the agreement then you should ask for assistance from a lawyer or other professional.
- Negotiate the terms. Before signing an agreement, you should ensure you agree with your responsibilities in the contract. If you don’t agree with certain terms, you need to negotiate them before you sign. If you make changes to the contract then all the parties need to initial the changes. You should also ask for a copy of the agreement.
- Using an agreement off the internet. Though there are many free resources on the internet to get agreements for different parts of your business. You should have them reviewed by a professional. This should be considered an investment into your business as it could cost you a lot more in the long run if your agreement is not legal.
- Don’t leave open spaces on the agreement. Never sign an agreement with open spaces. This will allow the other person to fill in the open spaces with information. Therefore if there is an open space on the agreement which is not applicable to the agreement, then cross it out or write not applicable in the space.
Now, that we know more about the basics of an agreement, what critical agreements does your small business need?
1. Partnership agreement: You should have a partnership agreement which will spell out the obligations that each partner has to the partnership. It should also advise what will happen should one of the partners want to go their separate ways.
2. Employment contract: If you decide to employ staff in your business you need to ensure everyone has signed a contract of employment. This document should state the job that has been offered, the responsibilities of the job, and the salary and benefits. It should also have the following parts in it:
- advice on how the contract can be terminated by both parties,
- a confidential and invention agreement which states how proprietary information of the company will be protected
- a section on how disputes will be handled, and
- a statement that says any changes to the agreement should be done in writing.
3. Non-disclosure agreement: This agreement will help to keep proprietary information of the company confidential. This should be signed by potential employees, freelancers who work with your business, and your employees.
4. Service agreement: If you supply a service to a customer, you will need them to sign an agreement. This agreement should state the terms and conditions of the service you offer, the responsibilities you have, how you will be paid and the key deliverables of the project. If you are paying for someone to create a logo or write content for your business, you should also have a section in the agreement about who holds the rights to the material created in the agreement.
By putting these agreements in place you will be well on your way to having a great business. It is always important to consult a lawyer to ensure that you have the right agreements in place for your business.
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