What Are Common Business Contracts?
Business contracts are important for all parties involved in a business dealing. Contracts serve to protect a business’s interests by providing clear and defined obligations and responsibilities for each party. Each business contract serves a specific purpose. Many different types of contracts exist to protect differing interests of a business. These may include, but are not limited to, key employment agreements, independent contractor agreements, restrictive covenants, confidentiality and non-disclosure agreements, business structure agreements (i.e. operating agreement, bylaws, partnership agreement, etc.), leases, sales-related agreements, indemnity agreements, and the list goes on.
Restrictive covenants prevent one party from engaging in a certain activity. The most common restrictive covenants include non-compete and non-solicitation agreements. These agreements can be in the form of a stand-alone contract or as clauses included in a larger agreement such as an employment contract or operating agreement. Businesses must use extreme caution in drafting this type of an agreement, as the State of Wisconsin is very strict concerning the enforceability of these provisions.
Visit our non-compete agreements page to learn more.
Businesses often have information they need to safeguard to stay competitive and successful. This may include secret recipes or plans for a newly invented product. The company must protect these highly regarded assets to stay competitive. Non-disclosure agreements also assist with the sharing of confidential information between companies where the companies seek to do business together.
Want to learn more about nondisclosure agreements? Read our blog post about NDAs today.
Business Structure Agreements
Business structure agreements dictate how the business will be run and how certain decisions and transactions must be made. The most common types of business structure agreements include operating agreements, partnership agreements, bylaws, and joint ventures.
Business partnerships are common in the business world. This type of agreement exists to spell out the obligations and responsibilities between two or more people who have formed a partnership. It may include items such as the distribution of profits, allocation of losses and liabilities, specific duties for each member, length of the partnership, etc.
By setting clear guidelines in a partnership agreement, each partner can proceed in the business relationship with confidence that the other partners will be held to a certain objective standard. If you have any questions or need help drafting a partnership agreement, contact a trusted business law attorney for help.
Joint Venture Agreements
A joint venture agreement is a contract between two businesses that join together to meet a certain goal. The companies pool resources to reach that goal in a certain timeframe and are mutually interested in the project. A joint venture agreement protects both parties by providing specific details on how the business is to be managed.
An operating agreement is used by businesses that choose to be a Limited Liability Company (LLC). This document outlines how the LLC will operate. This can include items like ownership percentage, members’ duties, and allocations of profits and losses. Although this is not mandatory for starting an LLC in Wisconsin or Illinois, it is highly recommended that the members of an LLC create an operating agreement.
Lease agreements can be used for property and equipment. These agreements describe the rental period duration and the money owed for renting out the property or equipment.
Commercial Lease Agreement
A commercial lease agreement binds tenants (businesses or individuals) to the agreement set forth by the property owner. For example, when a business rents office space, a warehouse, or a stand-alone structure that is to be used to conduct business in, a commercial lease agreement will be utilized.
Residential Lease Agreement
Residential lease agreements spell out the terms for individuals renting an apartment or house. Commonly, payments are made every month and the agreements are typically for a one-year duration.
Equipment Lease Agreements
Equipment lease agreements are contracts between a lessor, who owns the equipment, and a lessee, who rents the equipment. The lessor is paid by the lessee for the use of the equipment through periodic payments. Equipment that is often the subject of these agreements include machinery and vehicles.
The equipment may be leased for a long duration or short period of time dependent on what is stated in the contract. The contract should include a payment schedule that specifies the amount and due dates that payments should be made. Cancellation policies should also be clearly stated.
Sales-related agreements often dictate how goods or services are bought or sold. These may include bill of sale, purchase order, and warranty agreements. Bill of sale is an agreement stating the terms of the sale and acts as a “receipt” for the purchase and delivery of the goods. Purchase orders is an agreement that details the number of items, price, and delivery of the goods. It helps ensure that the person buying agrees to the quantity of items they are purchasing, the price, and the terms of the delivery. Lastly, warranties are agreements that ensure the repairing or replacing of a product if it is necessary within a given amount of time.
An indemnity agreement is a contract that helps reduce a business’s liability when unexpected damages or losses occur. This contract essentially states that the business will not be held liable for accidents or financial losses that happen during the business dealing. The person on the other side of the contract is agreeing to pay for any damages or losses that occurred.
For example, if a prime contractor is working on a large construction project and has many subcontractors, they may ask the subcontractors to sign indemnity agreements. If an employee of the subcontractor would be hurt on the job due to something like negligence, then the subcontractor would be responsible and not the prime contractor. Indemnity agreements are also commonly used when a business is involved in an activity that is associated with larger risk. Skydiving companies often use these in the form of waivers which limits the burden they face if an injury does occur.
If you have any questions about indemnity agreements, contact our business lawyers to understand how to go about drafting and utilizing indemnity agreements for your business.
Need help drafting or negotiating your business contracts?
There are many different business contracts that serve specific purposes. Understanding what these contracts are and how they can help you is the first step to implementing these contracts in your business dealings. These contracts may help you protect your business and those you do business with. To learn more about contracts that may aid you and your business, contact an experienced corporate & business lawyer dedicated to helping you. The attorneys at McDonald & Kloth, LLC have many years of experienced helping businesses, big or small. Contact us today at 262-252-9122 or use our contact fill form to get in touch with one of our attorneys.