Common Contracts Used in Business

What contracts do you use in your business?

When running a business, contracts are an inevitable part of operations.

Contracts can be verbal or written. It’s always preferable to use written contracts and in some situations you can only use a written contract such as:

  • Agreements about buying, selling or mortgaging land and houses⠀

  • Consumer finance or credit agreements⠀

  • Agreements to buy a car from a licensed motor car trader⠀

  • Door-to-door sales agreements⠀

  • Agreements for things to be done more than one year from the date of the agreement being made

If you agree to provide a service to a hirer for money, you have entered into a contract. As long as a contract has these elements:

  • An offer⠀

  • An acceptance⠀

  • An intention to create a legal relationship⠀

  • A consideration (usually money)

You’re promising to do a job for the hirer and the hirer is promising to pay you for it. The agreement may be enforced in court in the event of any disputes.

Here are some common contracts used in business:

”Handshake”/verbal agreements 

A “handshake agreement” (sometimes known as a “gentleman’s agreement”) is usually a verbal agreement between two parties who shake hands to ‘seal the deal.’ Verbal contracts can still be valid contracts but sometimes they are harder to prove than a written contract.

Employment Contracts

An employment contract is an agreement between an employer and employee that sets out terms and conditions of employment. If you employ staff, you need to use an employment agreement.

An employment contract can’t provide for less than the legal minimum entitlements set out in:

All employees are covered by the NES, regardless of whether they’ve signed a contract. A contract can’t leave employees worse off than their minimum legal entitlements.

For more information, head to the Fair Work website here.

Contractor’s Agreement

Independent contractors and employees have different rights and obligations.

Independent contractors provide services to another person or business. They aren’t employed by that person or business.

Independent contractors usually negotiate their own fees and working arrangements and can work for more than one client at a time. Independent contractors are also called contractors or subcontractors.

It’s very important to use well drafted contractor agreements when engaging the services of a contractor.

For more information on contractors head to the Fair Work website here.

Terms and Conditions/ Terms of Trade for supplying goods or services

If you supply or use the services of a business then it’s important to put the terms of your arrangement in writing.

Terms and conditions set out matters such as the terms of payment, ownership of intellectual property, the limitations of your liability, and steps the parties must take in the event of a dispute. While your Terms of Trade do not need to be signed by your customers, it is still necessary for your customers to accept them just like any other contract.

Remember that businesses have obligations under Australian Consumer Law when it comes to certain guarantees you’re required to give to consumers.

Privacy Policy

A privacy policy is a statement about how you manage someone’s personal information during the course of interacting with them.

This will mostly be your customers, but it may also include other people such as prospective customers or people who subscribe to your newsletter or other advertising material.

A privacy policy outlines how you collect, hold and use personal information. Many businesses are required by Australian privacy law to have a privacy policy. If you’re unsure whether your business needs to have a privacy policy, check out the OAIC’s website here.

Licence Agreement for IP

Making your intellectual property work for you is a smart business decision. If you want to monetise your intellectual property by licensing it to another party, a Licence Agreement is a great place to start.

IP licensing gives the licensee the right to use, but not own, the IP.

There are three main types of licences:

  • Exclusive Licence

  • Non-exclusive Licence

  • Sole Licence

Read more about licensing your IP here.

Non-Disclosure Agreement (NDA)

A Non Disclosure Agreement (NDA) is a legal contract between at least two parties who agree to not disclose information covered by the agreement. ⠀

It’s also known as a Confidentiality Agreement (CA), Confidential Disclosure Agreement (CDA), Proprietary Information Agreement (PIA) or Secrecy Agreement (SA).⠀

In Business there are many situations where NDA’s can be used in order to protect and share confidential information with another party.⠀

Some of these could be:⠀

  • Presenting an invention or business idea to a potential partner, investor or distributor.⠀

  • Sharing financial, marketing and other information with a prospective buyer of your business.⠀

  • Showing a new product or technology to prospective buyer or licensee.⠀

  • Receiving services from a company or individual who may have access to some sensitive information in providing those services.⠀

  • Allowing employees access to confidential and proprietary information of your business during the course of their job.⠀

Commercial Lease Agreement

Leases can be long, complicated documents and it can be difficult to appreciate the importance of getting them right. But like any business expense, it’s really important to give them due consideration before signing and entering into a lease.

It’s also really important to know what kind of lease applies to your business. Your business will either have a Retail Lease or Commercial Lease.

Commercial Leases apply to commercial property – which is generally for things such as warehouses, industrial sites or office buildings. It’s really important to know which one applies to your business. For more information, check out our handy blog article on Commercial & Retail Leases here.

Contract Templates

Did you know we sell Contract Templates in our online store? A contract tailored specifically to your business is always preferable over a contract template but we understand legal spending might not be high on the budget when starting out. A Contract Template, drafted by our expert Commercial Lawyers, is a fantastic temporary alternative.

We have drafted our contract templates in a broad way so that they can be used by a variety of different businesses. They are customisable, digital products that are downloaded instantly after purchase. They also come with easy-to-understand instructions on how to best use your templates. We know how important it is to legal proof your business right from the start!

Our online store has the following contract templates:

  • Terms of Service

  • Privacy Policy

  • Licence Agreement for Creatives

  • Supplier Terms of Engagement for Creatives

  • Terms of Trade for Creatives

Visit our store here.

The Benefits of Written Contracts

The benefits of a written contract include more certainty for both parties and clearly setting out the details of what was agreed upon.

Depending on the type of contract, matters that can be set out in a contract include:

  • materials

  • timeframes

  • payments

  • a procedure to follow in the event of a dispute.

A written contract will help to minimise your business risks by making the agreement clear from the outset. It also helps in the event of any dispute resolution or litigation matters.

Well written contracts, that adhere to all legal requirements within your State/Territory, are a worthy investment. They help to legal proof your business and✨Do Business Better

At Litton Legal, we can help with any contractual needs when it comes to running your business.

Send our team an email on hello@littonlegal.com.au or head to our contact page here.