Business Agreements: 31 Types You Should Know
Business agreements are the heart and soul of most companies and organizations. They help ease business operations and processes without friction between involved parties. Business contracts—when executed correctly—can help to manage business expectations and avoid liability.
Before setting up shop, every business requires contracts that legally bind parties and ensure that the business is law-abiding. Business agreements apply to sole proprietorships, partnerships, and even multi-million dollar corporations in all industries—including retail, manufacturing, and technology.
Operating a business without enforceable business agreements doesn’t work. Contracts provide guidelines on how to address any problems that may arise during the lifecycle of a business. Drafting the right contracts for various business scenarios can prove integral for a business, shielding it from legal loopholes that other parties in business deals may exploit.
The right types of business agreements can pave the way for smooth business operations by creating legal obligations for all parties. From hiring employees to reaching agreements with influencers, business contracts ensure all parties in the agreement know the deliverables required from them. They may also outline the legal repercussions individuals may face if they fail to honor such agreements.
How standardized and personalized contracts compare
Different business scenarios require different types of contracts with their particular uses and purposes. When drafting a contract, it’s crucial to consider the parties involved, the dynamics of the project, terms, and the legality of the contract.
A standardized contract comes in handy when setting similar terms for large volumes of business agreements. Standard form contracts that are used in many business-to-consumer agreements leave little room for negotiations. For instance, non-disclosure agreements with former employees who know your trade secrets can be standardized to ensure that your company doesn’t have to develop different contracts every time.
Personalized contracts are special business agreements developed for specific business transactions that rarely happen on a day-to-day basis. For instance, businesses don’t merge or form partnerships every day. Such business agreements may require personalized contracts with additional clauses that involved parties may deem necessary, like voting rights and privileges.
31 types of business contracts
Business agreements, both complex and simple, should be documented, covering all the aspects and terms of business arrangements. Different business scenarios require different types of contracts to address specific business needs.
A contract amendment is a separate legal document that revises an existing business agreement’s definitions, terms, sections, and clauses. It adds, removes, or changes the particulars of the original agreement once all involved parties reach a consensus.
Amendments to different types of business agreements happen when parties forget to include crucial clauses in the original document or when a party’s business situation changes. For instance, contract amendments can help to change payment terms between a business and its suppliers.
2. Bill of sale
Also known as a sales agreement, this contract transfers property between two parties. It is a legal agreement that recognizes the transfer of rights between a seller and a buyer. Owners use this contract to prove ownership of a piece of land whenever such a scenario arises.
3. Enterprise service agreement
An enterprise service agreement is a business contract entered between an enterprise and a customer where the enterprise provides services—like accounting, cleaning, or internet services—to the customer. It highlights details such as the terms, cost, and assurances of the service.
An enterprise service agreement protects the interests of the service provider and clients, ensuring requested services are delivered and the enterprise is compensated accordingly.
4. Franchise agreement
A franchise agreement is a legal agreement between a company or business—franchisor—and a franchisee outlining the rights and obligations of both parties. Details of a franchise agreement may include:
- Duration of agreement
- Location of operations
- Franchisee’s fees and investment
- Use of trademarks and patents
- Renewal and termination of the agreement
Franchise agreements help franchisors penetrate new markets while relying on other businesses to make this a reality.
5. Employment agreement
These types of business contracts define the relationship between an employer and employees. Also referred to as an offer letter, this legal document clarifies details—including the duties and responsibilities of the employer and employer, compensation, benefits, duration, and grounds for termination.
Employment agreements can be tailored to become industry or business-specific. It is used to establish an official relationship between an employer and employee during the recruitment process. Digital employment contracts help companies handle a large volume of turnover or high growth periods.
6. Employee invention assignment and confidentiality agreement (EIACA)
An EIACA is a contract that legally transfers ownership of the rights of an employee’s work during the period of employment to the employer. Employers use this type of business agreement—common in development, creative, engineering, and design industries—to secure intellectual property (IP) rights of their employees’ inventions, making it easier to patent them.
7. Inbound agreement
This business contract occurs when a licensor agrees to transfer IP rights to a licensee, allowing them to use certain or all aspects of the IP for their use. In an inbound deal, the licensee pays certain fees to use a different brand’s IP or name for their products or services.
8. Indemnity agreement
Also known as a release of liability agreement, indemnity agreements hold that an individual agrees to indemnify another person for burden, damage, or loss when providing a service or product. The “hold harm clause” or “hold harmless clause” in these business agreements states that a party is aware of the risks of the particular activities they engage in—like rock climbing or skydiving—and they don’t hold the business liable for harm or damages.
9. Independent contractor agreement
These types of contracts lay out the scope, obligations, and deadlines of independent contractor work. An independent contractor agreement clears any confusion regarding an individual’s classification at the place of work, tax obligations, and payments. It affirms that the relationship between a client and a contractor isn’t an employer-employee relationship.
10. Influencer agreement
An influencer contract is a legal agreement between a social media influencer and a brand to market products or services. Using an influencer agreement helps define ownership of a brand’s work, consent and approval procedures, and clarify marketing expectations.
11. Photography release
A photography release form is an agreement between a photographer and a client. It is basically a photography contract that signs off rights regarding the usage of the client’s photos. If a client’s images will be used for commercial purposes, like promoting an event or a product, it’s advisable to sign a photography release agreement.
12. Master service agreement
In business, relationships with other parties may continue for a long period while the initial terms of the contract remain the same. A master service agreement is a business contract that simplifies future agreements by including initial terms, speeding up the negotiation process.
13. Non-disclosure agreement (NDA)
An NDA bars parties like employees, vendors, suppliers, and independent contractors from sharing confidential or proprietary business information with people outside the business. It empowers businesses to take legal action when parties reveal sensitive information that could jeopardize business operations.
14. Non-compete agreement
It’s easy to work in a company, learn their trade secrets, master their business model, and then resign to open a similar firm or join a competitor. A non-compete agreement prevents an employee from competing with their former employer for a given period.
15. Order form
An order form is a document that customers use to request services or products from sellers. This business agreement between the two parties specifies the quantity, price, and payment terms of ordered products.
16. Partnership agreement
When two or more partners agree to work together, they sign a partnership agreement. Partners enter into this official agreement when they pool their contributions and spell out their roles in the establishment. It establishes rules regarding the partnership’s management, investments, business responsibilities, and how the partners share profits and losses.
17. Property or equipment lease
This business agreement contains the terms and conditions of the lease of property or equipment for a particular period. It protects the lessor’s investment and the lessee’s rights.
18. Purchase order
A purchase order is a business agreement between a business owner and a seller where the former commits to buying items at a certain price, with agreed-upon payment terms and delivery dates. Purchase orders are the types of business agreements that help to avert conflicts in the supply chain process.
19. Renewal order form
This contract makes it easier for a customer to renew a subscription for services or products requested earlier by reducing how much time it takes to fill out an original order form. This form includes details of services/products, billing period, and applicable fees.
20. Request for proposal (RFP)
An RFP is a legal document that solicits bids for complex projects, drawing the attention of potential contractors who submit bids. An RFP is used when announcing a project by a business or organization seeking specialized capability or technical expertise in their field.
21. Security agreement
This is a binding contract between a lender and a borrower. A security agreement applies when someone borrows a loan and waives the ownership rights of their collateral if they default on the loan.
22. Statement of work (SOW)
An SOW is a contractual document used in project management to define responsibilities, timelines, deliverables, and liabilities in the scope of work. A properly drafted SOW helps align project goals, coming in handy when assigning projects to freelancers and independent contractors. SOW can also stand for scope of work, which is a subsection of a contract.
23. Security and privacy addendum
A security and privacy addendum is a legal document detailing the terms and conditions of the security and privacy of personal data. It shows how a website collects, stores, uses, shares, and sells data from customers and visitors.
The information a website may collect includes:
- Personal information like name, age, and email
- Financial information like credit card data
- Social media information like Instagram login details
- Derivative information like browser and IP address
24. Termination notice
This is a formal letter ending the employment relationship between an employer and an employee. It is used to dismiss a worker from their job by formally notifying them that their employment contract has ended.
26. Transfer agreement
A transfer agreement is a legal document that parties use when transferring materials or information between them. Business owners can use this document to transfer their business assets and liabilities to another party in the event of a buyout.
27. Vendor service agreement
These types of contracts in business are used when hiring vendors to provide products or services, clearly stating the conditions and expectations of the agreement. A vendor service agreement is used to layout deliverables that business owners and event planners have in mind as well as the date, location, and time of the event or service.
A warranty is a written business agreement by a seller guaranteeing to repair or replace parts of a product or redo a service if certain conditions aren’t met.
29. Beta agreement
Beta agreements are business agreements between a company and users who agree to use its product or service before its official launch. These types of contracts in business are used to maintain confidentiality in the program and avert liability issues. Users, in turn, provide feedback to product developers who can make the necessary adjustments to their products or services.
30. Memorandum of understanding (MOU)
An MOU is a written business agreement between parties declaring consensus towards a common agenda and achieving mutual goals. It establishes a business relationship between two or more parties.
You can use this agreement when two firms are working together on a project. Some of the issues that an MOU can address include:
- Specified activities
- Duration of the MOU
- Roles of involved parties
31. License agreement
Also known as a licensing contract, this business agreement allows other parties to use an inventor’s service or product for a share of the profits. Business owners use license agreements to permit parties to use IP, including copyrights and patents for royalty percentages.
Whether you are starting a new venture or an accomplished business owner, digital contract management can help you run your operations smoothly, avoiding unwarranted business scenarios or legal issues. Developing and managing both standardized and personal contracts shouldn’t be a complicated task. Simplify the process of digital contracting with the use of our contract management software.
Ironclad has the perfect solution to streamline your business agreements, laying the legal groundwork for future business relationships. Request a demo today to find out how your business can take advantage of our digital contracting solutions.