Contracts Agreements You Need To Get Into As A Business Owner And What To Look Out For

When you go into business you will be getting into a number of standard contracts and agreements that you will be using frequently in your business. These include those you use frequently with employees, clients, suppliers, and partners. You can draft these and have a lawyer review them for compliance so that they are binding. They will protect you from unnecessary litigation and help you enforce your rights when they are breached.

It is important to note that more agreements in the continent are entered based on a gentleman’s word – without any documentation than with. Your ability to keep to agreed verbal agreements can be a source of very beneficial relationships and lack of it can be more damaging to your business than a court ruling against you. This is because word of mouth is one of the strongest marketing and defamation tools and courts are considered to be corruptible. This does not mean you avoid getting into an agreement but that you are consistently honest in your dealings. Courts do recognize verbal agreements but their enforcement will vary in different jurisdictions and is shaky.

Typically the contract should be signed by both parties however in the event it is not signed yet work commences, as is often the case, a previous contract, the country’s constitution, and sector laws will guide decisions in the event of a grievance.

It is important right from the beginning to be clear on the kind of employees you will have, what they will be doing in the organization and how much you will pay. The total agreement with the workers is contained in their appointment letters, job descriptions, and unionized employees in the collective bargaining agreement (CBA). These documents may have different names in different jurisdictions however they are all important and should be consistent – thus the importance of thinking through them before you hire your first employee.

Worldwide, terms of employment are set by the International Labour Organisation and then adopted in countries through the constitution. You, therefore, can have an agreement with an employee that may contravene the constitution and in such a situation if they go to court, despite your agreement, the court would judge based on the constitution.

The reality is that not all jurisdictions will take these documents seriously and many employees do not know about their rights. However increasingly people are getting informed and you could find yourself in trouble even 10 years after treating an employee unfairly – depending on the type of organization you created and the agreements you had with them. Generally, employees have an upper hand when they go to court.

Contracts are periodic agreements. Most companies will start by giving a short-term contract or an employment letter that has a probation period after which the employee gets a confirmation letter. Whether you mention it or not, you are liable for the employee when they are on your premises or discharging their duties outside the premises. Employers sometimes put clauses that they will not be liable for independent contractors who come to work on their premises but this is against the law. Ensure you consider this often overlooked liability when getting insurance – depending on how risky it is for contract workers to be on your premises e.g. in a construction site. Even where there is no written agreement as in daily workers in a construction site you are still liable for them.

A typical contract will contain:

Referred to but put in a separate document – normally the employee handbook, are company rules, administrative procedures, grievance procedures e.g. arbitration, and details of different benefits. You may not need all these aspects in your contract but it is important to incorporate all the relevant once – and this is most of them.

Some things may not be mentioned in a contract. Typical things not included in a contract are those necessary to work and activities against the law or considered by society to be immoral. For example, a driver would be expected to have a current driving license, a cook a health certificate as required by law, and homosexuality though allowed in many western countries is not be allowed in African countries. With proof, these would constitute major reasons a business would have an advantage over an employee in court.

Agreements with suppliers and clients will be two-fold depending on who has better bargaining power. The different names indicated who has the bargaining power in the agreement. You draft them when you have better bargaining power or the client drafts them when they have higher bargaining powers. For example;

Normally drafted by the landlord. You will need to carefully go through it and ensure it meets your requirements. The reverse will occur when you are letting out space in your property. As you become bigger, property owners come to you to rent space from them. For example, if you are a major retail outlet and a new mall is coming up. In such a situation you could dictate a lot of what is in the contract without being the one drafting the contract in comparison to smaller outlets who have to take the terms set in the standard agreement.

These will be drafted by you to your clients or to service providers. The document indicates the agreeing parties and their address, the quality of service expected, and arbitration amongst other things. As a small service provider, the agreement would be drafted by your client and is referred to as a contract.

Service agreements to your client sometimes may not require the client to sign but are assumed when the client uses the service. This is especially true for many online businesses and large essential service companies. For example, people visiting your website cannot pilferage the content on your site. Even with a service agreement, you are limited in what you can demand from large service companies. For example, power outages and surges can cause losses but rarely do they get sued for damages.

A sales agreement covers the terms of agreement when a product is sold. It indicates the agreeing parties, items’ specification, quality, quantity sold, and after-sales service if any. Where there is a guarantee or warranty, this is also indicated in the agreement. Sometimes the sales agreement is simply indicated in the receipt – ‘goods once sold cannot be returned’. There should be a sign that says this so the client is informed before purchase.

The shareholder agreement indicates the legal relationship between shareholders while a share certificate indicates the number and what type of shares they hold. The share agreement covers:

A Will indicates what you want to be done and who inherits your estate – everything you own – when you die. Officially if you die without a will your spouse or child can file a request in court. If there is no relative to be found your estate goes to the government. Unofficially a lot can happen in between so it is in your interest to write a Will especially if your estate is significant.

The difference between the Power of Attorney and your Will is that the Will takes effect only when you die but you can affect the Power of Attorney while alive in case you are incapacitated. The Power of Attorney ceases when you die. There are different types of Power of Attorney and you will need to confirm which are applicable in your jurisdiction and choose what works for your specific needs.

The Will must be documented – in writing; typed or handwritten and the contents in a will should:

You need not include:

While you can leave your estate to whomever you want, your Will can be disputed in a court of law by your children and spouse if they are not provided for adequately. Keep your will in a safe place and let the executor know where it is.