What are the Two Types of Contracts used in Business?

This article explains the 2 types of contracts common in business use and the details of

1. Sales agreements with customers and
2. Agreements with employees or contractors.

We previously discussed the basic elements of a business contract in this article.

What are the two types of contracts used in business? 

Business owners know that contracts are a normal part of operations. Engaging the services of employees or contractors usually involves a contract. Contracts also come into play when providing customers with business products or services.

This article explains the two types of contracts common in business use. The details of sales agreements with customers and agreements with employees or contractors are also outlined.

Businesses use contracts as legally binding agreements with customers or contractors. The contract lists the parties involved, explains the obligation of each party involved in the exchange, determines the price for the exchange of goods or services, establishes a timeline for delivery, and outlines what happens if one of the parties defaults on their terms of the agreement. Two types of contracts are standard in business.

Sales agreements with customers  

Sales agreements between a business and its customers are what keep businesses alive. There is no work without a paying job to perform to bring in revenue. This type of contract outlines what the business provides to the customer. Defined terms for pricing, payment schedules, and date of delivery are created in these business-to-business contracts. When the sales agreement contracts are created, both parties can clearly see what the business provides the customer and how much the exchange costs. It is also important to include who is responsible if something goes wrong and to agree upon what is covered by each party and what is not covered. Sales agreement contracts are mutually beneficial to the party receiving goods or services and the party providing goods or services in exchange for payment. The contract gives clarity and security that each party will act in good faith to complete their end of the transaction and fulfill the terms of the contract.

Agreements with employees or contractors

Legal agreements between a company and its employees or contractors are similar in some ways to contracts between businesses. These agreements outline the terms expected of each party. Every business expects its employees or contractors to work. The contract or agreement a company makes with its workers provides an understanding of the work the business expects employees to complete. The business also agrees to compensate the employee or contractor for the work performed or tasks completed. A sub-agreement is usually implied or directly outlined in a code of conduct that the employee will behave in a respectful, professional manner and avoid rude or disrespectful behavior. Companies also expect employees to be honest and not steal. Failure to perform the expected work or violations of the code of conduct lead to dismissal. Employment agreements provide employees and businesses with stability and potential for mutual success around the set expectations.  

Does your business need help creating or reviewing a legal contract? 

At Business Legal Management, we specialize in legal review and help companies of all sizes with business contracts and employee agreements. 

DISCLAIMER- This website talks about various business topics and various legal situations. The statements given by the host or guests or author do not constitute legal advice given to any individual or business. The host and/or guests are giving their personal opinion based on their personal and professional experience. Examples given are given broadly as examples with names removed for privacy. If you do have questions about your business or legal situation, please reach out and email info@businesslegalmanagement.com to discus your business or legal situation.