Contract Features: Everything You Need to Know
Contract features can depend on the type of contract used, for example an employment contract has features like noncompete clauses and nondisclosure agreements.3 min read
2. Non-Compete and Confidentiality Clauses
3. Terminations and Work Products
4. Considerations in Employment Contracts
5. Sale of Goods Contract Characteristics
Contract features can depend on the type of contract used. An employment contract, for instance, can include features such as noncompete clauses and nondisclosure agreements. Every contract will have unique features to consider before either party signs the agreement.
Basics of Employment Contracts
If you're a business owner that needs to hire an employee, it's important to use an employment agreement. Before requesting that your prospective employee sign the agreement, however, it's crucial to understand the different features included in these contracts. You can write an employment contract to include features that are beneficial to your businesses. Understand, however, that both the employer and the employee are legally bound by the terms of the agreement.
Something of value must be exchanged in a contract, known as consideration. If a new employee signs an employment agreement, employment is the thing of value that they will receive. If you want an existing employee to sign an employment agreement, you would need to give them something else of value, as they are already employed. Typically, you would offer your existing employee a pay increase or a promotion in exchange for their signature.
Non-Compete and Confidentiality Clauses
Employment contracts can contain a variety of features. One such feature is a noncompete clause. A noncompete clause prevents the employee from seeking employment with one of your competitors after leaving your business. If you're interested in including a noncompete clause in your employment contract, you should be aware of what is and is not enforceable.
You can usually prevent your former employee from working for an employer for a set period of time or in a specific geographic location. It will not be possible for you to stop the employee from working for a competitor in perpetuity.
Confidentiality clauses are also very popular contract features. When included in a contract, these clauses can cover several different issues:
- Trade secrets
- Business operations
- Client lists
- Marketing strategies
For example, if your business operations rely on trade secrets, you can use a confidentiality clause to prevent employees from revealing these secrets.
Terminations and Work Products
A feature of many contracts is a clause that determines the ownership of work products. In some businesses, employees invent products as part of their employment, and employers have the ability to own these products by adding a clause in employment contracts that addresses ownership of work products.
Employment contracts also include termination provisions, which outline the specific circumstances when an employee can be terminated. It's common, for instance, for these provisions to state that failing to follow the terms of the contract can result in termination.
Considerations in Employment Contracts
Employment contracts are similar to other contracts in the fact that both parties, the employer and the employee, are legally bound by the contract. In particular, the parties must fulfill their duties as described in the contract. For instance, if the employer promised the employee medical insurance in the agreement, the employer must provide an insurance policy. If the employer does not provide the employee an insurance policy, the contract has been breached.
Great care should be taken when writing the clauses and provisions in an employment contract. If you wish to include a noncompete clause in your employment agreements, for example, the clause cannot be so broad that it would be impossible for your employee to find employment after leaving your business. In general, most courts will enforce a noncompete clause that lasts between six months and one year. If you attempt to use a noncompete clause to prevent former employees from working in your industry anywhere in the country, the clause will likely not be enforceable.
Sale of Goods Contract Characteristics
A sale of goods contract includes several elements. First and foremost, these contracts must include two different parties. One party is the seller and the other is the buyer. Two parties are essential for these contracts, as a person cannot purchase their own products. It's possible for two part-owners of a good to use a contract of sale to transfer the good. For instance, if two people own a car, one person may sell their ownership to the other person by using a sale of goods contract.
If you need help understanding contract features, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. 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.