Most Common Types of Business Contracts

December 15, 2023
Business Formation & Planning

What type of business contracts you’ll need depends on your business’s nature, size, and complexity. Contracts are a way to protect your interests. They also clarify what each party is obligated to do and their rights.

You may not think a contract is needed until a business relationship goes sour and you’re left holding the bag. Rather than find yourself in this spot, consider using a business attorney to draft your contracts to ensure they fully protect your interests. The attorneys at Lusk Law LLC can answer all your questions about contracts and help you protect your interests.

Call us at (443) 535-9715 for more information.

Why Choose the Attorneys at Lusk Law LLC?

Our attorneys at Lusk Law LLC provide legal services for different types of businesses. We take a personalized approach to each client, focusing on their individual needs and goals. We know the different types of business contracts and will advise you on the one that’s best for you.

We are dedicated to each case we handle and provide honest, respectful, and effective services to all our clients.

Our attorneys are experienced in legal disputes and litigation, so you can trust us to represent your interests if your contract is breached. We will keep you updated throughout every stage of your case and only make decisions you are comfortable with.

What Makes the Difference Types of Business Contracts Enforceable?

A contract is a legally binding agreement or promise between parties. However, for it to be enforceable, it must have the following elements:

Competent Parties: Minors and those who lack mental capacity can’t be parties to an enforceable contract.
Offer: An offer is a promise one party makes in exchange for another person doing something. Both parties understand the offer and can accept or deny it or send a counteroffer.
Acceptance: Both parties agree to the same terms. There is a “meeting of the minds.”
Consideration: This refers to the benefit each party to the contract receives in exchange for doing something. You cannot enforce an agreement without consideration.
Performance: At this stage, both parties carry out the promises made in the contract. If performance is partial or faulty, the contract may or may not have been breached depending on the circumstances.

With some exceptions, a contract must not be written to be enforceable. But getting it in writing is better than an oral agreement, which is hard to prove.

What Are the Most Common Types of Business Contracts?

Understanding the different types of business contracts lets you know what you need for your business. The following are the most common types of business contracts:

Ownership Agreements

A business with multiple owners should have an agreement between those involved. No matter what legal entity is created (partnership, corporation, LLC), all those sharing ownership should be a party to this contract. The ownership agreement contains the following:

The relationship between parties
Individual obligations and contributions to the business
How to resolve disagreements
How to change the agreement
The distribution or payment of monies from the business to the parties
What happens if a party wants to leave the business
How to add new owners
What happens if the company closes.

Licensing Agreement

Licensing contracts are for those who invented a new product. This agreement allows you to earn money when another person uses your invention. It contains terms like the amount users pay, reproduction rights, product exclusivity, and use restrictions. A licensing agreement is an excellent way to monetize your intellectual property and protect your rights.

Lease Agreements

Lease agreements are used for properties and equipment. A property lease agreement covers offices, manufacturing, or commercial real estate structures and is entered between the landlord and the business. On the other hand, an equipment lease agreement is used to access pieces of equipment you don’t have but need for your business for a specified period.

A lease agreement for equipment or property will contain the following elements:

Acceptance of the lease
Rental payments
Ownership
Security deposit
Term of lease
Responsibility of care
Insurance
Taxes and fees
Liability for loss and damage.

Our Fredrick, MD, business attorneys at Lusk Law LLC will explain these terms in detail before you sign the lease agreement.

Employment-Related Contracts

Employment-related contracts go beyond hiring staff. These contracts set out the terms and conditions of your workers’ employment. Examples of employment-related contracts are:

Employment Agreement: It covers job roles, payment, promotion, etc.
Non-Compete Agreement: It bars employees from working for a direct competitor for a specific period after they leave your company. In Maryland, non-compete agreements do not apply to employees making less than $31,200 per year or $15 per hour.
Confidentiality Agreement: This agreement keeps present or past employees from disclosing certain information about your business to third parties. It is often used where the law prevents companies from getting their staff to sign a non-compete.

The team at Lusk Law LLC has experience with a wide range of employee-related contracts. We can craft core documents for you to ensure that rights and duties are clearly defined.

Indemnity Agreement

An indemnity agreement ensures you are not burdened by any loss or damage when entering a high-risk venture. It protects you from risks and liabilities created by the other party to the contract. It is essential when entering commercial contracts, loan agreements, supply agreements, licensing agreements, starting a construction project, etc.

Independent Contractor Contracts

An independent contractor is a person or business you hire to perform a specific job for a certain period. They usually have their own business and do not follow the rules employees do. An independent contractor contract stipulates the relationship between your business and the contractor, the services they will render, and the duration.

Maryland uses the ABC test to determine whether someone is an employee or a contractor. Under the state’s Workplace Fraud Act and Unemployment Insurance Law, a person would be an employee unless:

You have no direction or control over the worker
The person has an independent business that’s the exact nature of the work performed
The job is outside your usual course of business or outside your places of business.

Note that you cannot classify an employee as an independent contractor. Doing so will leave you open to lawsuits from the employee, and the state will also fine you for such misrepresentation.

Most Common Types of Business Contracts FAQs

As a business owner, having questions before and after entering a contract is standard. Here are some commonly asked questions:

Can I Enter a Contract Orally?

Yes. Oral contracts are legally binding but hard to prove. Therefore, it is always best to have a written agreement.

What Happens If the Other Party to a Contract Breaches It?

If the other party breaches the contract, you can take legal action to get them to remedy it. This involves filing a lawsuit for breach of contract in court.

Do I Need a Lawyer Before Entering a Contract?

Generally, you do not need a lawyer. However, it is prudent to do so as there are hidden clauses you cannot identify, but an attorney can. Also, a lawyer will ensure the terms of the contract are favorable to you and do not infringe on your rights.

Can I Get Compensatory Damages for a Breach of Contract in Frederick, MD?

Yes. The goal of compensatory damages is to make you whole, like the breach never happened. You will recover the actual damages suffered from the breach.

What Types of Business Contracts Do You Need? We Can Help!

If you need a business contract, irrespective of the type, we can help. Our business contracts attorneys at Lusk Law, LLC, will guide you on the kind of business contract to use and customize it based on your needs. We are advocates for life’s obstacles and opportunities and will help you avoid obstacles and exploit business opportunities.

Call us at (443) 535-9715 to schedule an initial consultation.