It would be risky to operate businesses without a contract. Verbal agreements will not work since either party can forfeit their obligations. Without the written agreements, it would be difficult for a venture to seek resolution for the breach of contract.
There are numerous agreements that businesses get into in their daily operations. Therefore, it is beneficial to structure the contracts with compliance to the standards in the company’s operating procedures and the legal aspect. If a company has a wrong arrangement, they open themselves up for exploitation through different interpretations of the agreement.
The Contract Lifecycle
A contract has various phases in its lifecycle. It is essential to adopt contract management software to help manage the volumes of agreements a business gets in its daily operations. You can visit https://www.contractsafe.com to get a customizable platform for contract administration and management.
The initial stages include a request for engagement with another party, and the management can approve the drafting of an agreement. There are negotiations towards the terms before the parties can sign the document. The initial draft will undergo amendments depending on the agreement. It is beneficial to seek legal expertise during the drafting process, especially if it is the first time drafting such a contract. In subsequent deals, the business can use the previous versions to guide them.
Once the parties in a contract agree to the provisions in the document, they will sign it. Every party needs to abide by the obligations set out in the agreement. Failure to uphold the end of the deal will prompt the other party to seek legal action.
Types of Contracts in Businesses Operations
Below are types of contracts that are common with businesses;
1. Lease Agreements
Businesses will have a written agreement with their landlords when leasing or renting a property. The commercial property owners will have a contract ready. It is essential to scrutinize the details before signing the document. You do not want to commit to an agreement that does not suit your needs.
Makes sure the dimensions they indicate is accurate, and it fits your business needs. The terms should permit the business to use the space as it suits their business with a favourable leasing duration with the option to renew the agreement. Consider the leasing rates between different entities to get the best deal and if you can sublet the space.
2. Employment Contracts
Every worker a business has needs to work under a contract. Having non-contracted employees is illegal and does not comply with the labour laws. The written agreement should highlight the relationship between the individual and the company. At the same time, it should outline the responsibilities the contracted person undertakes on behalf of the company.
Some essential items to include in an employment contract include; the specific job requirements, responsibilities, remuneration, other benefits, and mode of termination. In most cases, the company may require the employee to sign a confidentiality clause. Whenever the employer wants to amend the contract, they need to communicate it to the employee in writing.
3. Sales Contracts
Regardless of the type of goods a business sells, it is essential to have a sales contract, especially when trading in bulk or expensive commodities. Companies will include the terms in their sales agreement in the invoice and order forms. However, they can draft a contract for each deal they get into. The contracts will include the cost of products, tax obligations, payment modes, warranty and other liabilities.
4. Services Agreements
Ventures offering services will usually have a written agreement with the party they are serving. Since they are not offering tangible items, it is critical to have a legal agreement about the scope of dealings such a business has with another party. The service providers need to develop an excellent deal that includes details about their services. It should consist of the fees they are charging and other terms depending on the type of work they offer. A service contract will help a business get justice if the other party does not pay for the service provided.
5. Financial Contracts
Businesses will inevitably get into financial contracts from the loans they take to finance their business operations. A financial institution drafts the agreement, and the terms will likely favour their business. Therefore, it is crucial to understand the terms before taking the loan. Also, ensure you negotiate for an improved deal than what they usually offer.
Consider the interest on the loan and terms to repaying the debt. The ideal deal should not include any penalties during the repayment period. It should clearly outline the timelines to make payments. On the other hand, there should not be restrictions on how the business can utilize the money.
Conclusion
It is essential to have an efficient system and strategy to manage the contracts due to the complexity of many agreements. Contract management software is the secret.
