Business To Business Contracts: Everything You Need to Know
Business to business contracts are legal agreements between two or more parties. They're often used when services are rendered for a fee or when precise services need to be provided.3 min read
Updated November 6, 2020:
Business to business contracts are legal agreements between two or more parties. They're often used when services are rendered for a fee or when precise services need to be provided.
No matter what form of business you run, written agreements protect you. In today's world, most agreements are in writing despite verbal contracts still being legal (except for specific situations).
Consideration of all possible outcomes means contracts are well detailed with clear conditions that need to be met for a contract to be enforceable. An enforceable contract can go to court.
Most contracts could easily be verbal as they won't ever see a courtroom, but when something goes wrong, a written contract protects both parties. If one party to a legitimate contracts feels the other party has breached the contract, the party harmed can file a lawsuit against the breaching party. Litigation is the legal process used to decide if the contract has been breached or the breach was negated due to various circumstances.
If your business is going to trade physical products, receive or give services, or you want to make a formal agreement for any reason, use a business contract to get deals confirmed. This avoids miscommunications as the outlines are clear.
The three common business to business contracts often have similar information mentioned in a contract.
In terms of getting paid, a business contract will outline details on:
- Terms around when the project needs to be completed:
- What must be delivered
- When payment is due
For a transaction involving physical products:
- Date of order
- Delivery requirements
- Quantities ordered
- Payment details
For a transaction involving services:
- Exact dates of performance
- Scope of work
- Payment terms
While some elements must be required in every contract (especially offers, considerations, and acceptance), different contracts address different situations. Most small businesses use the following sets of contracts:
Bill of Sale: The transfer of goods (ownership) from one party to another.
Agreement for the Sale of Goods: This indicates the contract of the sale (It's okay if it is confirmed post contract.) like a receipt.
Purchase Order: The first offer to purchase something.
Warranty: A contract is voided when a set of conditions or actions is broken.
Limited Warranty: A warranty limited to a specified part(s).
Security Agreement: Involving a loan, it's the contract between the loaner and borrower.
Employer Agreement: Involving the details of an employment contract.
Employee Non-compete Agreement: An agreement in which the employee cannot work for a direct competitor post-termination (for a specified period).
Independent Contractor Agreement: Like an employer agreement but regarding the limited work contract period.
Consulting Agreement: The tasks, responsibilities, and payment involved in a consulting relationship.
Distributor Agreement: The details of a business and distributor.
Sales Representative Agreement: Usually defining the commission amount (and tabulation) for a salesperson.
Confidentiality Agreement: Information that cannot be disclosed to third parties by agreement.
Reciprocal Nondisclosure Agreement: An agreement between two parties who won't disclose trade secrets.
Employment Separation Agreement: Formally ending an employment relationship.
Retail Property Lease: A contract between the landlord and a business regarding office leasing, manufacturing, or commercial real estate.
Equipment Lease: The amount of time equipment can be leased for.
Franchise Agreement: The relationship between franchisor and franchisee with details including support, advertising, use of brand, etc.
Advertising Agency Agreement: Determining the activities to be completed by an agency.
Indemnity Agreement: The transferring of risk between parties under a pre-disclosed payment
Covenant Not to Sue: When an enforceable contract has been breached, you agree to claim damages and not to sue them.
Settlement Agreement: Meaning two parties agree to end the lawsuit in exchange for small concessions (paid cash to plaintiff most of the time).
Release: Some businesses have customers who take on assumed risk. This releases the business from that liability.
Assignment of Contract: The legal transfer of benefits and obligations from one party to another.
Stock Purchase Agreement: The agreed sale of stock to an individual.
Partnership Agreement: An official agreement between two or more partners outlining their responsibilities.
Joint Venture Agreement: An outline for all parties in a joint venture detailing obligations, goals, and financial contributions.
Agreement to Sell Business: Paperwork related to the terms of a business sale.
Between customers, partners, and other interactions, businesses draft and sign a large number of contracts. Some contracts are as simple as a bill of sale, others can take months to put together.
A small business attorney can help you understand terms of a contract helping you make good business decisions or post your legal need on UpCounsel's marketplace. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.