All types of business contracts must include specific elements, including an offer, consideration, and acceptance. However, different business scenarios have different kinds of contracts.

Common Types of Business Contracts

Small businesses tend to use the same kinds of contracts for many purposes, such as purchase orders and employment. As such, they will become familiar with these, but might not be aware of other types of contracts that can meet their needs.

One of the most common types of business contract is the sales-related contract. This is a legal agreement describing how property, goods, and services are sold and purchased. It can also state how to transfer a title, if necessary. Typical sales-related contracts include:

  • Bills of sale — a hybrid legal document transferring a piece of property and providing evidence that an agreement was reached at the time of sale; vehicles are commonly transferred via bill of sale to recognize new ownership
  • Purchase order— a legally binding agreement committing a business owner to buy an item at an agreed-upon price; purchase orders also spell out delivery dates and payment terms
  • Security agreement — pledges property or an asset as collateral to secure a loan; if the borrower defaults on the loan, the security agreement allows the property to be forfeited to the lender
  • Warranty — actions or conditions that would void the business contract; a “limited warranty” is a warranty limited to one or a few parts of the contract

General business contracts cover topics related to a business' structure and how stakeholders are protected. Common general business contracts include:

  • Partnership agreement — outlines the relationship between business partners and their obligations and contributions to the business
  • Indemnity agreement — part of the contract in which an individual agrees to indemnify, or compensate, another person for damages stemming from an agreement; for instance, a kennel owner's indemnity agreement might prevent lawsuits if a dog is hurt by another animal at the kennel
  • Nondisclosure agreement — provides business owners with legal protections if a supplier, vendor, independent contractor, service provider, or employee shares confidential information about the company; always sign a nondisclosure agreement when collaborating with others
  • Franchise agreement — outlines the relationship between a franchisor and franchisee
  • Advertising agency agreement — establishes the job scope performed by the agency with regard to payment and duration, among other things
  • Settlement agreement — contract between two parties to end a lawsuit if certain concessions are met, which usually means paying cash to the plaintiff
  • Release — typically refers to a liability release, which means customers assume some risk
  • Assignment of contract — a legal benefits and obligations transfer from one party to another
  • Stock purchase agreement — agreement to sell certain stocks to a specified individual
  • Joint venture agreement — outlines the goals, obligations, and financial contributions of parties involved in a joint business venture
  • Agreement to sell business — a contract documenting the terms of a business sale
  • Licensing agreement — required if you have a licensed product to sell
  • Promissory note — essentially an IOU that memorializes a loan and repayment requirements

Employment contracts are agreements that set the terms of an individual's employment. These contracts can include:

  • General employment contracts — agreements outlining the relationship between an employee and employer, including compensation, job duration, and grounds for termination
  • Noncompete agreements — contracts that specify a period during which an employee cannot compete with your business after they leave the company
  • Independent contractor agreements — help determine the relationship between a freelance contractor and client
  • Consulting agreements — outline responsibilities and tasks for consulting relationships
  • Distributor agreements — define relationships between distributors and suppliers
  • Sales representative agreements — used to define a salesperson's commission and how it's calculated
  • Confidentiality agreements — contracts preventing someone from disclosing sensitive information to third parties
  • Reciprocal nondisclosure agreements — both parties agree not to disclose each other's trade secrets
  • Employment separation agreements — also known as termination agreements, these contracts formally end employment
  • Power of attorney — these agreements allow someone to make legal, medical, and financial decisions on behalf of someone else; the person with power of attorney is called the agent or attorney-in-fact
  • Pet care agreements — these contracts cover pet needs should you die before the animal does, including provisions for their exercise, medicine, and food; a pet care agreement allows you to leave funds for your pet's care after you're gone

The last common business contract is the lease, which can cover anything from security deposits and rent to rules about parking and pets.

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