Business owners should become familiar with the common types of business contracts that they may need. Five typical business contracts are the business entity agreement, nondisclosure agreement, contractor agreement, sales-related agreement, and commercial lease. Although you probably had a lawyer prepare these contracts for you, understanding what they are and who they affect could be important for your business. For one example, someone may violate the terms of a contract and you may need to enforce it with the help of a business lawyer.
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Business Entity Contracts (e.g. an Operating Agreement or Partnership Agreement)
A business entity agreement refers to an agreement that describes how a business will run. Two examples of business entity agreements are operating agreements and partnership agreements. An operating agreement describes the operations of a limited liability company, including detailing the responsibilities of the members and managers. You may need to file other documents to create an LLC, but the operating agreement explains how the day-to-day operations of the business will run.
Similar to an operating agreement, a partnership agreement describes the responsibilities of partners in a general or limited partnership. Some partners may have more a more active role in day-to-day operations of the partnership, while others may be “silent partners” – investors who contribute capital but do not handle the day-to-day.
Business entity agreements are extremely important when it comes to “business divorces”, meaning the breakup or dissolution of businesses. A written agreement describing business operations often also describes what will happen if the business dissolves. This will become important when working with a business lawyer during the “divorce”.
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Nondisclosure Agreement
Nondisclosure agreements help businesses keep trade secrets and other private information from reaching competitors. These agreements describe the scope of information and documents that employees and contractors must keep confidential.
Businesses in specialized industries such as oil and gas may have internal processes, customer and supplier lists, or operating manuals that they do not want the general public or competitors to have. By having all management, employees, and contractors sign a nondisclosure agreement upon hire, a business can protect this information from release. If someone does leak the information, the business has legal recourse by seeking to enforce the agreement in court. The business may be able to win damages for losses it sustains because the information gets out. Should your business be in this situation, please contact a Houston business litigation lawyer for assistance.
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Contractor Agreement
All businesses who use the services of independent contractors should have written, signed agreements with the contractors. These agreements should describe the scope of services that the contractor will provide, the compensation for those services, and any other information relating to the work the contractor will perform. They also should detail the remedies that the business will have should the contractor not perform the work or make mistakes. Unfortunately, businesses sometimes need to enforce their contractor agreements when work isn’t done as described. Having an enforceable, signed contract agreement is a good start in this kind of dispute.
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Sales-Related Agreement
Many businesses sign contracts with vendors or sellers to buy or sell products or services. These agreements should detail every aspect of the sales arrangement. Sometimes sales-related agreements do not clearly explain what happens if one party does not fulfill its responsibilities under the contract. For example, the agreement should describe who takes the loss if a delivery from a vendor is late, causing delays in the rest of the project. The agreement also should detail payment terms. Because sales-related agreements can involve long-term relationships and lots of money, make sure your contracts are strong to avoid litigation.
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Commercial Lease
Many businesses also sign commercial leases to rent space for their operations. Commercial leases can be lengthy and complicated compared to residential leases. They also tend to involve more money and longer lease terms than residential leases. That’s why your business’s leaders should take care that they understand the lease terms. You may need the help of a lawyer to review the lease, especially if you have a dispute with the landlord. If you are a commercial landlord, you also may need legal help in preparing and negotiating appropriate leases for your tenants. Since location may be very important for your business or tenants, make sure your leases reflect your needs.
Let Our Contracts Lawyers Help
Do you have questions about a business contract? At Henke, Williams & Boll LLP, we tailor our business advice to your unique situation. As experienced Houston business lawyers, we help our clients find the best solution possible. To set up a consultation with one of our knowledgeable lawyers, call (713) 936-5521 or use our convenient Contact Form.