Essential Commercial Contracts Every Start Up Business Needs

posted by KeithDaniel

So, after months of planning, researching the market and potential clients, you’ve established your brand name, your business doors are now open and you are ready to supply your goods and services to the world.

The main thought on your mind is probably how long before you make a profit and, I would guess, that the last thing would be considering the commercial contracts that need to be put in place.

However, if you want to protect your business investment, then having the right agreements in place early on is crucial.

The correct contracts will enable you to:

  • Record the agreed terms between you and your customers or third parties
  • Help comply with relevant laws
  • Assist with misunderstandings that otherwise could develop into costly disputes
  • Provide you with protection should the customer or third party breach the contract

There are many different types of contracts, and your individual needs will often depend on the sector and industry you work in. However, there are some basic documents that every start up should have in place and we would recommend that you consider the following:

1 - Standard Terms and Conditions of Business

  • Whether you supply goods or services, in store or online, to businesses or consumers, every organisation needs terms and conditions of business.
  • They provide clarity about working with you, what clients should expect, information about the services you provide, your payment and delivery terms and many other key details. Most importantly they can limit and, where possible, exclude potential liabilities.
  • Using professionally drafted and bespoke standard terms and conditions, removes the need for contracts to be individually negotiated for each and every transaction, therefore saving on time and solicitor’s costs (a welcome relief no doubt!).

2 - Non-disclosure Agreements

  • I often speak with clients who tell me about their friendly chats with third parties, where they discuss their business and often disclose confidential information. When I ask if an NDA was entered into, the response is more often than not, no.
  • Your information and ideas are what gives your business its competitive edge and failing to enter into an NDA before disclosing information could lead to your ideas and secrets being stolen or capitalised on by someone else.
  • An NDA will help protect your business information by creating legally binding obligations to keep disclosed information confidential and they should always be entered into before disclosing information.

3 - Employment / Consultancy Agreement

  • Although employment contracts are not technically commercial documents, they are still essential.
  • An employment contract is important to clearly define the terms and conditions by which an employee will work. 
  • Employers are required to provide a statement of employment particulars within the first two months of starting work, but a more detailed contract is preferable to provide protection to confidential information and intellectual property whilst imposing restrictive covenants on employees who may leave. 
  • Without a contract in place, the risk is that terms will be implied through custom and practice, and there is much more likelihood of a dispute.

4 - Website Agreements

  • A number of issues will be encountered when setting up and operating a website, and these issues will need to be addressed in the contractual documentation.
  • Documents such as website terms of use and acceptable use policies can assist with addressing such issues but these are often given very little thought, but this is a risky strategy.
  • We would always advise businesses with an internet presence, such as a website, to have specific terms and conditions that address its access and use. They also assist in preventing the unauthorised reproduction of materials from the site or unapproved linking to the site. In a similar way to business terms and conditions, they can also reduce and exclude potential liabilities.

5 - GDPR Suite of Documents

  • The 25th May 2018 has come and gone, but that was just the beginning of GDPR.
  • Therefore, if you collect personal data through your business, you will need to comply with GDPR.
  • It is essential you understand that it is not enough to just comply with GDPR but you must also demonstrate your compliance. This is known as accountability. This is done by ensuring that GDPR principles are not only embedded within your organisation but that you also have in place the appropriate documentation and policies.
  • If you are a Data Processor (i.e. acting on the instruction of the Data Controller) then you need to ensure that written contracts are in place with that Data Controller.

So, what happens if you don’t use these documents? Well, every transaction carries risk, but a failure to put in place the right contracts could have a detrimental effect, especially if your liabilities are not capped.

Even if that is not the case, disputes arising due to not having these in place could be extremely costly, time wasting and stressful to resolve. Having proper, legally binding contracts in place is the best way of eliminating these problems.

The temptation is often to “borrow” terms and conditions from competitors or from a third party but there is no guarantee that these are the right fit or even legal and may do more harm than good.

At Berry Smith, we draft bespoke and legally enforceable agreements, tailored to your business and the daily risks it faces.

For further information on the issues raised in this blog, please contact Dan Dowen on ddowen@berrysmith.com or 02920 345511.

Dan Dowen, Commercial Solicitor at Berry Smith Lawyers