5 Types of Contracts Categorized by Different Businesses & Services

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In the business world, there are a variety of contracts that you can utilize for handling everyday affairs. The key to effectively using contracts is to anticipate risks and contain language that allocates risk within the contract. A business should always aim to dispel liability whenever possible. In addition, a business should have the necessary insurance to protect it from losses. A great insurance policy will be one that covers many of the risks that the business faces during its daily operations. These are some of the top contract that any business should use in the course of its operations.

1. Bill of Sale

A bill of sale is one of the most important contracts that any business can use. Under the UCC, contracts for the sale of goods for over $500 must be in writing. Having a writing is important in the event that there is a breach of contract. One party may be able to admit the written contract into evidence to prove that a valid contract existed. The bill of sale lists the products sold, the price and the names of the parties. It is also signed by the party against whom enforcement is sought. A bill of sale may also need to fulfill other contract formalities depending on the type of good being sold.

5 Types of Contracts

2. Confidentiality Agreement for Trade Secrets

Any business has certain trade secrets that makes it successful and competitive. A restaurant may be known for its world-famous hamburger sauce. A software company may be known for its highly-efficient computer programs. These products are only made possible with trade secrets of the business. The confidentiality agreement is a document that is signed by employees to ensure that they will not share trade secrets of the business. If an employee does share a trade secret, then he or she may be liable for damages.

3. Builder’s Risk Insurance

Builder’s risk insurance is used when a building is being constructed on property. Most contractor’s insurance companies sell this built into their General Liability policies. If a business owner is in the process of constructing a building, then he or she should definitely buy this type of insurance. A builder is protected in the event that a storm or other “Act of God” wipes out the building. If the building is destroyed by a hurricane, storm or fire, then a builder is not liable for covering the damages. While the builder would typically suffer losses for this destruction under the common law, a builder’s risk insurance policy provides funding to cover the builder’s losses.

4. Severance Agreement

In the event that an employer needs to fire an employee, a severance agreement should be used. An employee may be angered by the dissolution and try to sue the company. A severance agreement prevents any type of lawsuit in the future. The severance agreement should expressly state the rights that are being waived by the employee. Because an employer is asking that an employee waive certain rights, the employee is usually provided with extra compensation or items of value.

5. Acquisition Agreement

The acquisition agreement should be used when a business is purchasing another company or the company’s assets. The acquisition agreement is usually put in writing and serves as evidence that a valid contract was formed.

Every business should utilize these five contracts in the course of its operations. A business can benefit from the added protections that each of these contracts has to offer.

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