Contracts to Protect Your Business
Putting watertight contracts into place in your business is one of the most important things you can do.
In a small business, especially one that’s grown from a one-man band, it’s easy to neglect the things that don’t appear urgent or essential. Formalising agreements into written contracts, whether it be within your business, or with your suppliers or customers, can often fall into this category. The reality, however, is that putting the right contracts in place is one of the most crucial activities you’ll perform. Run through this checklist to see how watertight your dealings are...
Agreements within the business
- Association contracts
If you work with a business partner, you need to have defined the terms of your working relationship from the moment the business opened its doors. Your partnership agreement, and indeed any other shareholder contract or memorandum of incorporation, governs the entire relationship and is the cornerstone of all obligations and rights. Make sure you get an attorney to help you put together a contract that all parties agree to, and that is comprehensive to address any conflict or difficult decision that has to be made.
- Confidentiality and intellectual property contracts
If you have a product that can be easily replicated, make sure you investigate patents and trademarks and register where necessary. If you are presenting your business concept to outsiders (investors or even prospective customers perhaps), some type of confidentiality agreement may be in order, depending on the nature of your business.
- Employment contracts
It is in the interest of the business owner to create contracts for new hires that protect the interests of both parties. You may want to include provision for a longer notice period for example, or some restraint of trade clauses, rather than just rest on the Basic Conditions of Employment Act which apply if you don’t have your own contracts in place.
- Lease agreements
Before you sign a contract to rent premises for your business, check out things like renewal terms as well as escalation clauses.
Your agreements with insurance providers for office equipment and so on will probably be fairly standard, but familiarising yourself with the fine print will prevent any nasty surprises such as clauses that exclude cover.
Agreements with suppliers
If there are manufacturers or distributors closely involved in the production and supply of your product, you’ll want to put down in writing the terms that you’ve agreed on. Even if it’s just a once-off interaction, stipulate some sort of signed document; it needn’t be too lengthy and involved but is at least something to fall back on in the event that a dispute arises. This applies equally to any agreement you have with a third-party service provider, whether it be IT support, your accountant, or a consultant providing training services. The important things to agree on are payment, expected performance and turn-around times.
Agreements with customers
Your relationships with your customers are largely governed by the Consumer Protection Act, so make sure you are aware of all the provisions of this relatively new law. If you extend credit terms to customers, they will fall in line with the National Credit Act and should also be in writing.
The idea behind having contracts in place is not to heap up on top of your ever-growing pile of paperwork, but rather to give you peace of mind that your affairs are in order, allowing you to go about your business as usual regardless of circumstances.