A Brief Introduction About the Business Agreement
Some businesses require you to partner with other businesses, and some require you to sell or buy something. Some businesses are about providing a particular service to another business, and some businesses are independent ones. In all of these cases, Business Contracts or Business Agreements play a huge role.
A Business Agreement or Business Form lists out all the details of a particular partnership or business that needs proper outlining and adequate written communication. When should a project be delivered, what are the deadlines, what is the payment, how should it be paid, etc. are just a few details that any business will require in written to avoid conflict and confusion. A delivery business, for instance, involves the date of delivery, tracking number, etc. A retail store may want to sell something.
A business can also want certain information relating to the business to be confidential and may wish to sign a Business Agreement to specify such conditions. The agenda is not only to avoid conflicts but also to make sure that the business grows and a proper strategy is implemented.
It should be noted that some businesses want to decide key terms orally. While oral agreement can be done in the case of full trust, but it is advisable that you should always prefer a written contract to avoid conflicts.
Who Takes the Business Agreement?: People Involved
Any two or more people involved in a business can get into a Business Agreement. Two or more businesses can also get into such an agreement. Contrary to popular belief, such agreements are not only for big businesses, but they are also for small or individual businesses. There can be different types of Business Agreement, such as the Business Partnership Agreement or Business Associate Agreement. For a specific need, a specific type of Business Agreement can be picked by the people involved.
Purpose of the Business Agreement: Why Do You Need It?
As discussed above, in a case where one party is rendering its services to another, a Business Agreement should be considered. There are many more reasons why, as a business owner, you will want to consider it. Here is a list of such reasons –
- It specifies the details of a business deal between two entities or parties
- It outlines the terms, responsibilities, obligations and many other key provisions
- It makes the business deal between two parties legally binding
- It helps in avoiding conflicts and confusions
- It can be seen as a written proof for the promises made between two parties
- Prevents unnecessary communication
- Specifies how the payment will be paid and when payment is due
It doesn’t matter if you are a buyer of goods and services, supplier, retailer, wholesaler or independent contractor, a Business Agreement is a crucial document to keep things on a record. It also builds mutual respect and understanding between the two parties since they have one material to adhere to.
Depending on different purposes, there are many Business Agreements such as purchase order, security agreement, warranty, bills of sale, partnership agreement, disclosure agreement, promissory note, etc.
Contents of the Business Agreement: Inclusions
For each case, the type of Business Agreement can vary. The inclusions of such an agreement also depend on case to case. However, some common inclusions must be added and considered.
The Business Agreement will always have some necessary details like any other agreement or contract. There is not a fixed format that The Business Agreement needs to follow. As per the need, both the parties can choose which type of agreement suits them the best and what format they are comfortable with.
Necessary details are simple and less time consuming, yet one should be careful while mentioning them. Some essential information is names, addresses, phone numbers, etc. of both the parties. Further, the agreement must include the nature of the work, delivery date, payment mode, payment date, deadlines, etc. It should also specify the period for which the agreement will remain in effect, termination provision, confidentiality, governing laws, terms for breach or violation, etc. Dispute resolution methods are one of the most important inclusions of a Business Agreement.
The law that binds both the parties legally should be first made clear orally, and then it should be mentioned in the agreement. After all, it is only the law that can resolve matters if things fall apart for either of the party.
The agreement should be first checked very carefully by each party, and then it should be signed. Both parties must keep a copy of the contract.
How to Draft the Business Agreement?
Here is a step by step process of drafting a Business Agreement –
- First and foremost, it is important to note that some oral agreements are indeed legally binding but, for something as important as business, it is highly suggested that you do the communication orally first if you wish but then put everything on a written contract or agreement.
- Spell out all the small and big details of the business very explicitly. Make sure you first talk to the other company or other parties orally if you can. In big companies where that’s not a possibility, make sure you state every detail such as payment, deadlines, obligations, etc. in simple words in the agreement.
- Make sure both parties are aware of governing state laws. In case of any dispute, both parties must use the termination clause or governing laws. Hence, the termination clause should also be well defined in the agreement.
- Both parties can hire a business lawyer if they want to understand the details of governing laws and other vital provisions.
- Take the proper time to reach a conclusion and to sign the agreement. Both parties should be given time to make up their minds and read every detail carefully.
- Parties must make sure they only share the information that is needed to be shared. Confidentiality is something that the other party will promise, yet, one has to be careful.
Negotiations can make or break the deal. Make sure you know the limits and negotiate with a planned strategy and ideas. It is also essential to negotiate with the right people. For example, in the case of a delivery business, it is important to negotiate with the sales team and not the delivery agent. Depending on your requirements and need, make sure you first know and understand the roles of each member in the business.
Benefits and Drawbacks of the Business Agreement
There are no drawbacks to a Business Agreement since it is mandatory in many cases for the success and growth of a business. They also spell out important terms, which in turn, save much time and make work more efficient. However, since there are so many kinds of business agreements(1), for each care, terms will change.
Here are some more benefits of a well-drafted Business Agreement –
- For any transaction or deal, it serves as a proof, in case of any breach or violation.
- It spells out all the details of a deal explicitly, which saves time and energy.
- It tells both parties about their responsibilities and obligations.
- It makes a business more efficient and managed.
- It makes a proper structure for any business deal.
- It saves time and increases productivity.
- Can make sure that the payments are made on time.
- Can make sure the work is delivered on time.
Another significant benefit of a written Business Agreement is that it spells out all possibilities beforehand and prepare both the parties for the worse too. At the same time, it also avoids costly legal services.
What Happens in Case of Violation?
When both the parties get into a Business Agreement willingly and sign it, they agree to comply with every word written on it. The governing laws, rules, provisions, conditions, deadlines, etc. should be followed diligently to avoid any legal battle. In case one party violates the agreement, the other can take the help of the court. It is advisable that each party must take an attorney’s help to understand the state laws and legality of a violation.
Any Business Agreement between two parties must be drafted carefully. Small things such as reading every provision carefully, crossing any blank space in the agreement(2), etc. must be practiced before signing the agreement. Professional help is also advisable in case the business is huge and has many crucial obligations involved. Both parties must keep the information confidential.
In the end, all kinds of Business Agreements are an extremely crucial piece of document that works in favor of organizations, employers, businesses, and individuals in maintaining discipline and structure.