Kinds of Agreements in Business Law
Some of which are a part of normal business operations and others that are meant to protect businesses from unfavorable legal situations.3 min read
2. Kinds of Agreements in Business Law
Updated October 26, 2020:
There are several kinds of agreements in business law, some of which are a part of normal business operations and others that are meant to protect businesses from unfavorable legal situations. Some common agreements include partnership agreements, indemnity agreements, and nondisclosure agreements.
Common Business Contracts
Business contracts come in a variety of forms, and while they may look similar at first glance, there can be very big differences from contract to contract. If you own a business, you will likely need to use several different types of contracts and agreements. That being said, the majority of contracts used for businesses will fall into one of three important groups.
General business contracts, for example, are agreements that cover some of the most vital topics related to your business, including the structure of your company and protections available to your shareholders. A wide variety of general business contracts are available, including:
- Partnership agreements.
- Equipment leases.
- Franchise agreements.
- Employment agreements.
Another category of business contracts is sales-related contracts. These agreements cover anything that may be purchased or sold by your business, including goods and services. Sales-related contracts can also make it easier to transfer titles when needed.
A bill of sale is one of the most common sales-related contracts. With a bill of sale, two parties can transfer ownership of a piece of property. For instance, bills of sale are frequently used to transfer the title of an automobile. During your normal operations, your business may use several sales-related contracts, such as:
- Purchase Orders: This agreement will be used when your business commits to purchasing a certain item.
- Security Agreement: You would use a security agreement if you need to put up an asset as collateral for a loan.
- Warranty: A document that describes actions that would result in a contract being terminated.
Employment contracts are the third category of business contracts. These contracts are an important part of hiring employees for your business and can protect both your company and your employees. A general employment contract, for instance, will define your relationship with your employee and can cover several crucial topics:
- Length of employment.
- How the employee will be compensated.
- Any benefits that will be provided.
- Grounds for terminating the employee.
If an employee leaves your company, you may want them to sign a non-compete agreement, which would prevent them from seeking employment with one of your competitors for a set period of time. Some other types of employment contracts include:
- Independent contract agreements.
- Consulting agreements.
- Distributor agreements.
- Confidentiality agreements.
Kinds of Agreements in Business Law
The kinds of agreements in business law serve a variety of purposes, including defending your company from future legal actions. Learning about a few of the different agreements available is an important part of running a successful business. A non-disclosure agreement is a very common type of business agreement. The purpose of one of these agreements is to share information with another person without having to worry about that information falling into the wrong hands.
In most cases, one party that has signed the non-disclosure agreement agrees not to disclose any information that they receive from the other parties. These agreements, however, can also be mutual, meaning both parties exchange confidential information and are agree not to reveal this information.
A material transfer agreement is another type of agreement that you may need to use in your business depending on your industry. These agreements are used for the acquisition of research materials, and in some cases, biological materials and data. These materials have typically been generated by a government agency, private company, or a nonprofit.
Some agreements are not legally binding, such as a Memorandum of Understanding, which is a contract used when two parties wish to enter a partnership based on education or research. A Memorandum of Understanding will define the relationship between the parties, including outlining the objective of the partnership and each party's duties.
Because these agreements are not legally binding, they should not cover issues that would be included in most contracts. This can include compensation of the parties and confidentiality. A more well-known term for a Memorandum of Understanding is a gentleman's agreement. Generally, these agreements occur between higher education institutions, such as colleges or universities.
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