What Is a Business Agreement?

In earlier times, businesses were sealed through simple handshakes. If difficulties arose between the parties involved, the case is then brought to court even without a written document. To give you an example—Kaye and Hannah consent to a barter agreement. Kaye is an orthopedic surgeon, while Hannah is a businesswoman who sells expensive dogs for a living. In return for an Akita dog, Kaye offers Hannah free surgery for her daughter’s hip injury. After the surgery, Kaye, unfortunately, lost contact with Hannah and did not get what was promised to her. The question is, can Kaye sue Hannah without a written contract? Yes, she can, but it is challenging to look for substantial evidence without a tangible contract. Therefore, using a business contract is essential. A business contract is a written agreement made by two individuals or institutions who want to do business. This agreement can cover areas such as buy and sell, partnerships, employment, etc.

The Different Classifications of Business Agreements

There are many types of business agreements that apply to different kinds of businesses, and each type of agreement aims to protect the interest of the parties involved. Here are some examples of the various classifications of business contracts:

Sales and Purchase Agreement. A sales and purchase contract is an agreement that compels a purchaser to buy from a seller. Also, it obligates a dealer to sell an item to a buyer. This agreement is customary in real estate transactions where the parties involved are dealing with a significant number of items. One example is a transaction between a clothing manufacturer and a clothes store. A clothes store may order a large and specified number of clothes from a manufacturer under an SPA. This agreement helps both parties to anticipate the demand and value of an item.Buy and Sell Agreement. Also known as a business will, a buy-sell agreement, or a buyout agreement, this is a contract that specifies the distribution of a business share when a partner dissociates from the business or dies. Most of the time, this agreement demands for the remaining stock to be open for sale to the partnership or surviving partners. Moreover, this type of agreement comes in two forms—the cross-purchase agreement and the redemption agreement. The first allows the remaining partners to buy the share that is left behind by an owner while the latter is a business purchasing the stock that is available for sale.Partnership Agreement. A statement by Atty. R. Shawn Mcbride says, “When a business has two or more owners, using partnership agreements is very necessary. These agreements function to lay out expectations and foresee issues that may arise later on. For example, a good contract will explain what will come about when events like disability, death, dispute, or divorce happen. Without this agreement, the parties involved may end up waiting in court to let a judge decide the destiny of your business.” A partnership agreement is a legally binding contract between two businessmen who may have to deal with the following matters—ownership percentages, profit distributions, management descriptions, duties, and obligations, etc.Acquisition and Merger Agreement. Acquisition and merger are often defined as an integration of two different companies through many commercial transactions. An acquisition agreement is quite different from a merger agreement. A company purchasing another business institution is an acquisition—especially when the purchasing company takes over the operations of the institution. A merger, on the other hand, is the integration of two companies to form a new business system.Confidentiality Agreement. A confidentiality contract is an agreement in writing that ties up the parties involved in non-disclosure of private information. This agreement is most often used to prevent trading information from being publicly known. One best example is a non-disclosure agreement, which is typical for companies who are negotiating with other companies. Not only that, but NDAs are also applicable in an employer-employee relationship, where an employer requires the signature of an employee to bind him/her to an NDA. In entities discussing sensitive business information with each other, an NDA is necessary. For companies that have new workers, they let them sign an NDA.Non-Compete Agreement. Though the legality of a non-compete agreement is not the same in all states in the U.S., several states still apply this agreement in their companies but with some modifications. This agreement is a contract that stops an employee from competing with his present employer even after employment termination. The contract will plainly say that an employee must refrain from revealing any trade secret that the company owns. Moreover, it is different from an NDA, where an employee is not prevented from working for a competitor. It only prevents the worker from exposing confidential information related to the business, such as product details, client names, specialized technology, etc.

How to Create an Authoritative Business Agreement

Note that a business agreement is a deal where two or more individuals or entities attend to transactions involving services, goods, or money. It serves to secure the parties involved in case disagreements arise. The following are guidelines in making a basic business agreement:

Step 1: Put the Agreement in Writing

As we have seen in our example earlier, oral agreements are difficult to bring to court. Businesses who open themselves to many deals should have their arrangements put into writing in the even of future conflicts. Having a document that serves as proof of an agreement between two individuals or businesses is safer than a mere verbal agreement.

Step 2: Name All the Parties Involved

This is a very simple step, yet many business people often overlook this part of the agreement. Writing the legal and complete names of the people involved in the negotiation is of utmost importance, so the people who are under obligation to follow the provisions are evident in the agreement. Moreover, always remember to include the right suffixes of company names.

Step 3: Specify the Obligations of Parties

After naming all the parties involved, their obligations towards each other are then written. Don’t forget to write all the conditions that are applicable to make your contract dependable and authoritative. Bear in mind that a written agreement is an enforceable agreement, especially when it has the signature of the parties concerned. If you fail to remember a provision, then you can use the amendment clause written in the later section of the contract.

Step 4: Don’t Forget the Payment Details

Payment details regarding who receives payment, or when to release payments, or what the terms are for giving out payments must be in detail. This is the section of the contract where controversies usually arise. That is why it should be as specific as possible. Also, it is proper to include the payment method to avoid confusion.

Step 5: Include the Conditions for Termination

It is only right to include conditions for termination in case one party fails to meet deadlines or fails to obey the provisions. The party who becomes a victim of a breach of contract should have the right to terminate the agreement. These stipulations will make the contract fair on both sides.

Step 6: Type in Miscellaneous Provisions

Individuals or institutions should choose a law in their state to govern the agreement. They should also be of one mind when resolving disputes. Furthermore, they must keep things confidential between them, when it comes to business plans and strategies.


Does a contract have to be written by a lawyer to make it enforceable?

No. Lawyers are not under obligation to write business contracts to make them enforceable. Many businesses use business contract templates they can freely download or buy online. Still, the help of a lawyer can be advantageous because lawyers dig into details and possibilities when drafting a contract, and of course, they have more knowledge with laws that are applicable to make the contract more dependable.

How do you make a contract legally binding?

A legally binding contract applies both state and federal laws in the arrangement. Only then, a contract becomes legal, and this will mean that both parties must follow all the terms and conditions of the written deal. Moreover, a violating party will have to face the consequences of the damage they cause to the other party.

What makes an agreement void?

The following are reasons that makes a contract void. (1) It works against general policies. (2) It benefits only one party. (3) It is illegal or is related to illegal affairs. (4) One party is not qualified to be a part of a legal contract. (5) It is not feasible. (6) It affects other legal rights. Note that when a contract is void, it is no longer amended. You may need a lawyer’s assistance to keep your contract valid in the process.

How do you make a contract legally binding?

A legally binding contract applies both state and federal laws in the arrangement. Only then, a contract becomes legal, and this will mean that both parties must follow all the terms and conditions of the written deal. Moreover, a violating party will have to face the consequences of the damage they cause to the other party.

Are contracts still valid even without a notary?

Yes, but there are exceptions. There are some documents need notarization while there are others that don’t. Papers in real estate are documents that usually need notarization. Documents that don’t need notarization are goods and services contracts and petitions in court. A notary can be helpful in case a contract reaches the court because it identifies the person who signed the document.

Can you bring personal contracts to court?

Yes. A personally handwritten contract should be signed by the agreeing parties and witnessed by a third party who is not a close relative or a friend to make it effective. As long as these handwritten documents follow the requirements of the court, they can be valid.

It is a reality that all businesses are at risk for fraud because the thought of money dramatically affects how a person or business functions. That is the reason why the use of written agreements or contracts is of extreme importance, especially in business relations. The efforts given by one party to establish a company is as important as the efforts provided by other contributing parties. Therefore, everything should be fair between two parties or entities with a written business agreement at hand.