What Entrepreneurs Need to Know About Contract Law
As an entrepreneur, many business transactions you conduct will be contract based. Due to the nature of such business handlings, it is essential to be familiar with the basic types and requirements of contracts that are typically used. The following is a list of basic types of contracts and principles that every entrepreneur need to know as they embark on a new business venture.
Pacta Sunt Servanda
This phrase, Latin for “agreements must be kept,” means that all sections of agreements are legally binding between the parties and must be adhered to. Failure to follow what is outlined in said contracts is considered a breach and can result in legal action against the party at fault.
Basic Contract Knowledge for Entrepreneurs
Generally, contracts contain a lot of legal terms that are complex and difficult to understand. However, this is information that must still be known when conducting business.
If there will be third parties who will have access to sensitive information, there should be a confidentiality agreement in place. This contract will protect client details, as well as business data and ideas.
This type of contract is usually most frequently seen because it’s the document that lists the terms of the agreement between the entrepreneur and the client. The most common parts of this contract include the length of the agreement, associated costs, rules of payment, the basic rights of each party, and how to solve disputes.
If an entrepreneur seeks to have a promotion of their business done by a third party, there will need to be a contract in place to manage the terms of promotion, fees, and how long the promotion will last.
If there will be employees working for a business, employment agreements with the terms of the working relationship should be established. If the employees are independent contractors, there should be a separate contract for this arrangement.
Waiver of liability
This is one of the most important agreements if a service is offered to clients. This waiver will protect a business from legal action if a client is injured while participating in the services of the business.
If an entrepreneur wants to work with a third party, this type of agreement prohibits the third party from soliciting to current employees of the business. Furthermore, it prohibits the third party from starting the same type of business within a certain area. It is important to know that these agreements only last for a certain amount of time.
While contracts can be lengthy and contain many points of agreement, it is indeed necessary for an entrepreneur to understand and adhere to them. If any of the contracts need explaining, it is best for an entrepreneur to meet with a legal professional to discuss this further.
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