Key Contracts for Small Business Success

Without airtight, well-thought-out contracts, businesses may be in legal jeopardy. Companies need to retain a lawyer and make sure that business agreements are comprehensive, well thought out, and protective. The following are popular agreements that many businesses will use.

Employee agreements.

A good employment offer letter covers: the particular job offered; the responsibilities of the job; the salary and benefits; that the employment is "at will," meaning the employee can quit or be fired at any time; that the employee will be required to sign a Confidentiality and Invention Assignment Agreement (see below); and that the letter constitutes the entire agreement of the parties and can be amended only in writing and signed by the employer and the employee

Confidentiality and Invention Assignment Agreements. Employees have an enormous amount of access to a company's confidential information. And many businesses expect their employees to come up with ideas, work products, business strategies, and inventions.

To make sure employees keep proprietary information confidential, employers should require them to sign a Confidentiality and Invention Assignment Agreement. This agreement can also provide that the ideas, business strategies and other work products developed by the employee belong to the company and not to the employee.

Services Contract. If a company is providing professional services as opposed to selling a product, it needs to have its own good standard Services Contract. This type of agreement lays out the terms and conditions under which the services are to be provided and specifically lays out responsibilities and liability limitations.

Sales Contract. Many businesses sell products, and therefore need a good Sales Contract. The Sales Contract lays out the price, terms and conditions for the sale of goods, equipment, or other products.

The actual Sales Contract can take the form of fine print on an order form or an invoice, or it can be tailor-made for a particular sale. The key terms in Sales Contracts include price; price adjustments in certain events; responsibility for taxes, payment and credit terms; warranties to be given; disclaimers of various warranties; and liability limitations.

Confidentiality Agreement. There are numerous instances where a business owner will want to share confidential or proprietary information with another party. The Confidentiality Agreement provides that the recipient of information will hold the information in strict confidence and will use the information only for purposes of evaluating whether to enter into a business relationship.

A good Confidentiality Agreement will lay out the recipient's confidentiality obligations, the exclusions from confidentiality, the length of the confidentiality obligation, limitations on the use of the information, and the right of the disclosing party to seek injunctive relief to stop the other side from disclosing the information.

Of course, there is a long list of contracts that every small business owner will run across during his or her career. This is a place to start. With an experienced lawyer on board, a business can ensure that contracts are comprehensive and work in their favor.