Protecting your business – Part 2 – Contracts

TrademarksProtecting your business – Part two – Contracts

Welcome back to the second part in our series on how to protect your business. In our first article we looked at the importance of protecting your brand. In today’s article we shall focus on protecting your business through different types of contracts.

As you may be aware, nearly everything a business does can be linked back to a contract. For example, all employees are required to have contract or terms of employment, any agreement to buy or sell goods or services is a contractual relationship as are advertisements. Taking a step back from the trading side of your business, you may be in a partnership or company limited by shares, if this is the case this relationship may be regulated by a partnership or shareholders agreement.

As you can see, all facets of a business may or are subject to contract, having a bespoke contractual agreement in place may protect your business. Below is a list of different contracts that a business may use and they operate to help protect your business.

Contracts of Employment

A contract of employment regulates the relationship between the employer and the employee throughout the term of employment and importantly, thereafter.

A contract of employment can help protect you business in a number of different ways. The simplest way it helps protect your business is by setting out the terms of the employees employment i.e. salary, hours, place of work, holidays etc. If these are not set out clearly disputes may arise that ought not to. Setting out these terms in simple language can help avoid disputes about the terms of employment.

A contract of employment should protect your business not just during the term of employment but post termination as well, such clauses are known as post termination provisions. These terms may prohibit an employee from working for a competing business for a short period post termination or from divulging trade secrets. Such clauses (especially ‘Restraint of Trade’ clauses) need to be drafted carefully to ensure they are enforceable but when correctly worded they may add a great deal of protection to your business.

Supply of Goods and Services Agreements (Terms and Conditions)

Whatever goods or service your business offers, the sale made between the business and consumer is a contract. This contractual relationship can be regulated to help protect your business. Standard terms and conditions for the supply of goods and / or services can regulate when payment of invoices are due, the price of the goods / service, limit your business’s liability and regulate several other aspects of the relationship. In the event your customer breaches the terms and conditions you have a right to claim damages for breach of contract or you may have the ability to mitigate your loss. Bespoke terms and conditions should enable both parties to understand what their rights and obligations are, including the liability for non-performance (breach of contract).

Terms and conditions help ensure payment of your invoices are made on time and that your business’s liability is limited in the event something goes wrong.

Internal Contracts

Internal contracts include partnership and shareholder agreements. These contracts regulate the relationship between the owners of the business. These contracts seek to put the business first, to give the owners the tools necessary to resolve disputes without damaging the business’s commercial success. If the owners of a business do not have a contract regulating their relationship with one another and a dispute occurs that cannot be resolved, deadlock occurs. Deadlock is where an equal number of votes (by the owners) is passed both for and against something to happen in the business, therefore the business cannot get a definitive outcome. This can have disastrous effects for a business and can lead to the business being closed down as the parties cannot agree a way forward. Partnership and shareholder agreements provide solutions to this scenario and many other issues that may arise in order to ensure the business is protected.

There are many more contracts a business can utilise to help ensure it is protected. For more information on protecting your business please telephone our office and ask to speak to a member of the company commercial team.

Leicester Office 0116 255 1811 – Blaby Office 0116 264 3430 – Coalville Office 01530 835 041.