10 Types of Commercial Contracts You Need To Know

There are many types of commercial contracts that are signed among companies like NDAs, Employment Agreements, Settlement Agreements, and more. Commercial contracts legally bind all the parties involved and obligate them to perform their duties and meet the terms of the contract. Commercial agreements can be signed for commercial rental properties while hiring candidates or exchanging goods and services. Within a contract, everything is clearly stated, such as the cost, tenure, and what each party must do. 

It also talks about the course of action in case parties fail to meet the terms of the agreement. In the US, commercial agreements are governed by the Uniform Commercial Code (UCC). As per this, there is a uniform merchant rule for all commercial contracts. In case the parties limit or alter any conditions it must be stated within the agreement, or else the merchant rules are directly applicable.

 

Types of Commercial Contracts

Just as there are many types of businesses, there are many types of alliances between parties. Here are the types of commercial contracts: 

• Non-disclosure Agreement

During the contract period, the parties involved may share critical information about their company that is necessary to fulfill the need of the contract. However, if this intellectual information leaks out to others of the general public, the company might have to face legal consequences. A non-disclosure agreement states that the party involved is not allowed to share any information with others that are shared during their contract period. The information cannot be shared even after the tenure ends. This includes any images, videos, information about the company, etc.

• Employment Agreement

When a company hires an employee, there are many terms that are to be decided, such as the probation period, the work and responsibilities of the employee, their salary structure, legal liabilities, number of working days and leaves, etc. Signing a contract or an agreement means that the employee and the company are legally binding to the terms that are stated within the contract. It helps safeguard the rights of employees and helps protect the company in case of any legal complications.

• Settlement Agreement

A settlement agreement is generally signed between parties to avoid the complications of going through the court and fighting for a case. Within a settlement agreement, a mutual decision is taken between the parties that suffice the needs of the parties. It is generally signed over disputes such as a land dispute or complications in a contract, where one or more parties have been mistreated by the others and are willing to file for a case. A settlement agreement is a way to resolve matters out of court. 

• Co-founders Agreement

To expand the business, companies often consider hiring a co-founder. It is indeed a lot of work that can result in a mess if things are not done in sequential order. A co-founders agreement is necessary to understand the sharing percentage, salary structure, and the roles and responsibilities of the co-founder. A co-founder’s commercial contract is drafted and signed before the actual onboarding. This also helps prevent any legal complications and safeguards the company’s rights.

• Loan Agreement 

While renting out your valuable assets, such as a camera, car, or property for any commercial transactions, you need to ensure that your asset is protected. Signing a loan agreement can help ensure that your property is safe. Moreover, it also talks about the possession rights and the rental value. The agreement also talks about how long the tenant keeps the property or the commodity and who is liable for any maintenance and repair costs.

• Franchise Agreement

If you are opening outlets of your company where another individual is looking over it as their own, it is a franchise. Franchising is very common in the restaurant and clothing segment, where customers are attracted by the brand value of the company. Within a franchise, the original company goods are only sold. A franchise agreement is signed between the company and the franchise owner, defining the rights of the franchise owner over the company goods and financial transactions.

• Corporate Lease Agreement

A corporate lease agreement is a special rental agreement where the owner of the property rents out their property for any commercial or business purposes. Since this property helps run a business and generate revenue, it falls under the category of commercial property and has different norms than other rental properties. There are many complications and legal aspects that are included in the contract, such as who pays the maintenance, repair, insurance, and taxes on the property. It also talks about the rental amount that the tenant must pay. 

• Advisor Agreement

To guide through various processes within an organization, such as implementing new strategies and making changes to help run the company better, they hire an advisor. An advisor runs through the various aspects of the company and understands the current process they are following, including the loopholes and segments in which the company can improve.

An advisor agreement is signed between the company and the advisor to discuss the working hours, work to be done, and the stipend structure. Advisors can either be hired as full-time, part-time or a freelancer, depending on the requirement of the company. These employment terms are also stated within the contract. 

• Sales and Distribution Agreement

This agreement is very important for companies that make goods or commodities that are sold to customers. The sales and distribution agreement talks about how the merchants can sell the products. It also talks about distribution rights and whether or not they can further distribute the products to other distributors. 

• Out-sourcing Agreements

Most companies often outsource their work to others. They act as a middle merchant between a company that needs the services and people who are offering the services. Out-sourcing agreements often discuss the scope of work, its limitations, payment structure, confidentiality terms, etc. 

 

Key terms

• B2B: It refers to an exchange of services or goods between one business and another.
• B2C: It refers to the exchange of services or goods between one business and the consumers.

 

Conclusion

If you are interested in making it easy to search through your contracts, LawInsider’s contract repository makes it easy for you to upload your documents and find the hidden contracts among them. From 100 to 100,000 contracts, there are no limits and no hidden fees for the amount of documents that you can organize. With secure access and encryption for all files, you can be sure that your contracts stay safe and private.

 

References:

1. https://ksandk.com/corporate/types-of-commercial-contracts/#:~:text=There%20are%20several%20types%20of,AOA%2C%20and%20other%20such%20agreements.
2. https://www.lexology.com/library/detail.aspx?g=2ff4eb3a-f37b-490b-a497-03a1070cb816
3. https://www.google.com/amp/s/www.getlegal.com/legal-info-center/business-law/commercial-contracts/amp/
4. https://ironcladapp.com/journal/contracts/commercial-contracts/
5. https://bitman-law.com/5-common-types-of-business-contracts/