types of business contracts
Types of Business Contracts for any Business: Everything You Need to Know

Types of business contracts

So, are you ready for our take on Contracts 101?  

Small business contracts are incredibly beneficial. Without business contracts, misunderstandings can run rampant.  It is imperative to get your different types of business contracts in writing as you move forward in establishing your business.


Why would I need contracts? 

A contract is an agreement. It sets out what each of the parties to the contract promise to do or to deliver.   Should things go haywire, you can turn to a court of law so that the conditions of a contract can be enforced. This blog looks at common types of business contracts that most employers would need.   Nobody needs the hassle of going to court to sort out business issues. As a small business owner, it will be in your best interest to know what common types of business contracts there are and to think about which ones might be best suited to your company and its workings.


Common types of business contracts

Three types

There are three main types of small business contracts.

Some are just plain generic, some are sales-related, and some has to do with employment issues.


1) The run-of-the-mill general small business contracts

Typical, usual business contracts set out the structure of a business and how to protect everyone invested in it.   These contracts are usually part of every business, big or small.   Not all may apply to you, though.  

Here are a few examples:

  • Partnership agreements – stipulates the role of each of the business partners, their contributions, and obligations to the business.  A good partnership agreement will address the four D's:   What will happen to the partnership in the event of disability, divorce, disagreement, or death?   It is essential to know.
  • A joint venture agreement is almost the same, but different.   Two or more people or companies pool their resources to accomplish a specific task.  Usually, each maintains their separate identities, except for the joint venture.
  • Non-disclosure agreements – protects business owners so that employees or others cannot share confidential information about the business to anyone.   It can be terrible if you designed an innovative new cell phone app that will change how people think, and your employee steals your idea.   
  • Property lease agreements - Not every start-up can afford to buy their own premises immediately.   To lease a property for the day-to-day running of a business is, therefore, a common thing for most companies.   A contract is needed to set out the terms.  

Other general small business contracts may include agreements with advertising agencies, licensing agreements, indemnity agreements, settlement agreements, and more.


2) Purchased and sold:  the sales contract

A sales contract sets out how goods, property, and services can be acquired and sold.

  • Vehicles are typically transferred through a bill of sale.   It is evidence that an agreement was reached about all the terms of the sale.  A bill of sale differs from a standard contract in the sense that it is used after the exchange of goods.   It acts as a kind of receipt that the buyer has the right and valid title to the goods.
  • A purchase order shields a wholesaler, for example, from delivering goods and not getting paid for it.  The business owner states what they want to buy, how much of it, and at what price. 

It protects the supplier by specifying a delivery date and other payment details. When the goods are delivered, the contract protects the supplier so that he will get his money.

  • A security agreement is another common type of business contract.  Most business owners need some access to credit to grow their business.    One way of getting is credit is to give collateral for your debt.   Should another party have some security interest in your property, the terms are outlined in a security agreement.   The contract summarizes the terms and says what will happen if the debtor does not adhere to the stipulations.
  • Warrantees also form part of sales contracts.   A contractual warranty is a guarantee between two parties that the facts presented are reliable.   Should one or more of the points ever become untrue, the 'injured' party can claim from the other.   


3) Employment relations

The last type of standard business contracts is employment contracts.  

  • A general contract of employment spells out everything about the employer-employee relationship – from compensation and work hours to sick leave and notice periods.
  • A non-compete agreement will prohibit an employee from opening a similar business to yours or work in the same field for a period after leaving your employment.  The period of ‘non-competing’ can stretch from one to three years. 
  • A contract for independent contractors.   An independent contractor does not work for you full-time.  He/she might provide a service for a limited time.  You'll need a contract to regulate that.  US law is quite strict about this.


Should I draw up my own small business contracts?

You can, but…

You probably saw that movie where the hero scribbles a few conditions on the back of a pack of cigarettes.   He signs his name with a flourish, and the deal is done.   

Of course, nothing can stop you from drawing up your own small business contracts. Anything in writing, understood and signed by the parties, is usually considered as a valid contract.   

However, few of us layman is experienced enough to think of everything that possibly might go wrong.  The different types of business contracts discussed here will only protect you fully if drawn up by a professional.    It might cost you a few bucks, but in the long run, it is better to be safe than sorry.


Get any type of business contract for your business

If you are a small business owner, the chances are that you will encounter quite a few of these small business contracts. Contracts are great to quickly diffuse any disagreements, clear up confusion, or to help avoid litigation. BestLegalChoice can help you get any type of contract you need for your business. Find a business contract lawyer to assist with drafting your next business contract. You can post your legal request here or you can call (800) 390-3293 to speak with a lawyer. We only accept a small percentage of lawyers who apply to our platform that must pass our due diligence process. Our accredited lawyers have attained a high-degree of professional achievement in their field of expertise. They help clients prepare any type of contract they need for their businesses. We hope this list of different types of business contracts will help you think about the particular needs of your organization.


The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.


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