In this crooked world where evil and crime is rampant, it is no surprise that “trust no one” has become a popular moral among today’s people. As cynical and sad as that sounds, it cannot be denied that keeping an eye on every operation in your business is absolutely essential to ensure that no one is taking advantage of you.
It cannot be helped that we would need a trusted hand to help us handle our affairs, but trust should never be absolute in business. This said, it is absolutely important to have a well-written and solid agreement that would make sure that all parties are getting their equal shares and aren’t being mistreated in an organization.
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What Is an Agreement?
An agreement is the terms came into after negotiation. Agreements may either be verbal or written. While both are just as legally binding, it is recommended that every verbal agreement be documented in written form and that all written agreements have multiple copies (with each party given a copy) and these should be filed should they need to be brought up in the future.
In business, it is important that you document every move that your company makes, especially those that involve a lot of money or involve confidential information. There are many types of agreements you will come across as an entrepreneur. See these Sample Business Agreements in the site for a more in-depth explanations on the purpose of each type of business agreement.
Why Should You Have an Agreement?
Even though verbal agreements are as legally binding as written agreements, it is important to keep an official written document of all agreements as verbal agreements are difficult to prove in court. Most of the time, without legally acquired evidence, verbal agreements are dismissed as hearsay. Thus, a written form of an agreement duly signed by all parties involved proves to the court that all parties involved have negotiated and come into agreement.
In short, here are the reasons why it is important that you should have an agreement contract drafted and signed by the people you engage in business with:
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Advantages to Having a Business Agreement Contract
Being a business person, you might have invested your entire life into your company. To some business people, their business is like their child. And like a parent protecting their children, a business owner would also employ certain measures to protect their businesses. This is exactly what a business agreement contract is for. Having a business agreement contract is beneficial for these reasons:
- It clarifies the terms of the contract
Words spoken could be misunderstood by one or more of the parties involved. Unlike in a written contract where the terms are explicitly stated, verbal contracts could yield to misunderstandings, which could cause many problems in the functioning of a business.
- It dictates the conditions for termination of a contract
An agreement contract would provide a clause on how you could get out of it should you wish to end the contract. This ensures that you won’t be indefinitely chained to an agreement.
- It holds someone who breaches a contract liable for damages
An agreement contract also states what the consequences are should one or more of the parties defy its terms and conditions. If the contract is enforceable and valid in court, the aggrieved party could sue the offending party to pay for damages or fines.
- It serves serves as both a cushion to protect and a tool for defense
An agreement contract also serves as both a cushion of protection and a weapon of self-defense. It could be used to make sure that whatever critical information belonging to the company is kept confidential or as defense should they find themselves facing judicial problems.
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Types of Business Agreement
When you’re in a business, there are many paperwork you might have to face. Here are the types of business agreements, some of which will be covered in this article:
- Business Partnership Agreement
- Non-Disclosure Agreement or Confidentiality Agreement
- Business Purchase Agreement
- Business Loan Agreement
- Business Separation Agreement
Business Loan Agreement
Starting and keeping a business going requires a lot of money. It cannot be helped that in business, you might find yourself seeking out a loan, especially in its early days. When loaning money, whether as the borrower or the lender, having an agreement drawn up in the terms of payment will make sure that the “borrow” doesn’t turn into a “thank you.” Here are the terms of an loan agreement contract you must watch out for:
The parties involved
The complete legal names of the parties involved should be written down as they appear on valid IDs to prevent any loopholes from being used against anyone in court.
The exact amount loaned and its interest rate, if applicable
The exact amount of how much is borrowed should be stated in both word and number form. If the parties agreed that the amount borrowed would have an interest rate, the agreed rate should be written in the agreement contract.
How the debt owed would be paid should be explicitly written in the contract as well. Whether this be paid in bulk in a specified period of time or a certain amount every certain period, the agreement contract has to be very specific. If a collateral was handed to the lender, the contract must state this as well and what happens to it should the borrower fail to pay their debts.
Business Partnership Agreement
Business partnerships are perhaps the most difficult to manage. While it’s true that having a partner means dividing every problem the company might face, it also means that you have to divide the profit and revenues of the company. Business partnerships are difficult as it requires a lot of compromise and patience. If you’ve decided to team up with a buddy of yours and venture into a business, here are what a Business Partnership Agreement must contain:
The complete legal names of the parties involved
Lawyers are great at finding loopholes, and one of the possible loopholes they may use so their clients could squirm out of a lawsuit is the misspelling of their names. Make sure that the complete legal names as they appear in government IDs of the parties involved are what will be written in the agreement contracts.
Explicit definition of the division of work and assets
If one partner is the money and the other does all the work, it should be explicit in the agreement contract. To make sure that none of the partners slack off and take advantage of the other, it should be specified in the contract what exactly are expected from everyone involved in the partnership. It should also be stated in the agreement how much each partner would be compensated and how the financials of the company will be handled.
Ownership of the company
It is important to make sure that how much control each party has in the company. This helps in decision-making, especially if there are only two partners in the company.
Process to undergo to terminate the agreement contract
Should one or more partners decide they want to opt out of the partnership or should all parties involved decide to go their separate ways, an agreement contract should be able to provide the process that they must undergo to legally terminate the contract without being called out for its breach.
Consequences of breach of contract
The agreement contract must include all the consequences and fines due should it be breached. Some contracts even state that the offending party take care of the legal fees should the matter find its way to court.
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How to Make Sure Your Agreement Contract Would Hold
Just because all parties involved signed off on the contract, it does not mean it is immediately eligible to undergo litigation and could be used in court. The following situations immediately disqualify a contract from being legally binding and would not legally hold one who breaches it liable:
it was not entered into willingly by all the parties involved;
one or more of the parties involved were minors at the time it was signed;
one or more of the parties involved were not deemed mentally fit at the time it was signed whether because of mental incapabilities, distress and grief, or being under the influence of mind-altering substances such as alcohol or drugs;
the terms of the contract are unfair to one or more of the parties involved; and
the terms of the contract are against the law or are considered criminal to begin with.
When signing an agreement contract, it is of high importance that you should thoroughly read and understand every clause, term, and provision provided. If any part of it is unclear, you should consult the other parties and an attorney and have it changed on paper. See and download the other Sample Agreements we have on hand for more information.
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