Different Types of Business Contracts: Everything You Need to Know
There are different types of business contracts that parties can use when doing business with other parties. Business contracts are a normal part of everyone’s lives, whether it be an individual or business.3 min read
There are different types of business contracts that parties can use when doing business with other parties. Business contracts are a normal part of everyone’s lives, whether it be an individual or business. Before signing a contract, all parties should ensure that they are aware of the required elements for entering into a contract. This includes confirming that there exists an offer, acceptance of the offer, consideration between the parties, mutual assent, and legal capacitation.
Some businesses, particularly large businesses, sign countless agreements with business vendors, individuals, clients, suppliers, and lenders. There can be several different types of contracts that are signed and not just one kind. For example, while there might be sales contracts common for a business, there are other types of contracts out there, including general business contracts, employee-related contracts, and more.
Sales contracts are written agreements between parties for either the sale of goods or services. There are various types of sales contracts, including the following:
- Bill of sale
- Agreement for the sale of goods
- Purchase order
- Limited warranty
- Security agreement
- Licensing contract
Bill of Sale
Particularly, a bill of sale is a transfer of ownership of an asset from one party to another; it is essentially a formal instrument that is used to convey the transfer, e.g., deed. This is most common in the sale of real estate property. In addition to the sale of property, there could also be a sale of an automobile via a bill of sale.
Agreement for the Sale of Goods
This includes a contract for the sale of an actual good, i.e., product. Furthermore, this might be followed by a bill of sale after the agreement for the sale of goods takes place.
The purchase order is the initial offer that is made by the buyer to the seller. It will identify the intent and promise of a party to purchase a product from the other at the price offered by the potential buyer.
A warranty is a condition that might void a contract. If the product doesn’t meet the standards as expected, then the warranty will kick in and the purchaser (also known as the consumer) can hold the seller liable, and can either ask that the product be replaced or a refund be given. Most, if not all, products are covered by warranties.
A limited warranty is one that is given for only some products; therefore, it is limited to specific parts of the product itself. When it comes to limited warranties, consumers must understand what is covered, as limited warranties are very limited in scope. For example, if the consumer purchases a vacuum, a limited warranty might be covered on the motor of the vacuum. This means that, if any issues exist with the motor, the manufacturer will cover it. However, if other issues exist not related to the motor, repairs might not be covered under a warranty.
A security agreement is one between a financial lender and borrower. It pledges an asset or a piece of property as the actual collateral used to secure the loan. If the borrower defaults, the collateral asset is given to the lender.
A licensing contract allows you, as an inventor, to earn money from licensing your invention to another person or business. If you have a new product that you invented and want to allow another party to use the product, you can license it out to that party for a fee.
The contract should specify the payment terms, length of licensing, and the scope in which the product can be used. For example, the licensee generally can’t duplicate the product and make one of its own. Furthermore, if any issues arise and the licensing is used in a way not identified in the contract, the licensor can bring a legal claim against the licensee for theft of intellectual property and breach of contract.
The licensing contract is a great way for an inventor to raise money to further enhance his or her invention and expand on the invention for the future.
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