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  • Writer's pictureDaniel Ebady

Important Agreements Every Business Needs

Inherent in business is the proposition that reward only comes from taking on risks. Businesses and professionals are always taking on risks. One of the key ways to manage risks are through commercial agreements. Whether it be a standard form off the shelf to a substantive sophisticated agreement teed up to a specific transaction, a business should always have agreements governing their transactions.

In my view, the following are likely the types of agreements, a business at the minimum should have to govern its relationship with parties outside the business:

Non-disclosure Agreements

For most businesses the value of the business are in the form of information. Whether it be a special process, a key ingredient, formulation of different ideas etc., the business is not of value if that information becomes public knowledge. Having a curated NDA on hand at all times will go along way in protecting your interests in the business.

Services/Sales/Consultant Agreements

Your business will generally have one to a few focuses. Whether you are a consultant, professional, or you provide a specific set of services or provide goods, you will need a comprehensive agreement that is tailored to your circumstances. This agreement may need a fair bit of tailoring.

Every time you take on a new client/customer, you are exposing yourself to liability. One of the ways and likely the most critical way to limit that exposure is to limit your liability in the agreement. Expressly excluding all potential liabilities deriving out of a transaction is a fool's game. A court of law may strike it altogether. The agreement should clause by clause limit as much as liability it can possibly can. Therefore, the agreement must be curated and personalized to the specific set of transactions that have the same characteristics. If all you do is provide IT services, for example, backend IT services, then it is recommended to have a comprehensive and sophisticated agreement. That agreement can be used for all your transactions with clients.

However, as many of you know, agreements with larger sized businesses can be subject to negotiations. In these situations, a lawyer should be consulted on the impacts of the changes the counter-party is proposing. Don't go into a bad deal is the implied point I am attempting to make here. Short-term reward can bring upon long-term liabilities.

For longer term transactions, a service level agreement or master services agreement may be warranted.

Employment/Independent Contractor Agreements

Employees and independent contactors are two different animals. I should not be lumping them together, but for the purposes of this brief article I am. Here, you will need two different agreements.

Employees enjoy many rights contactors do not. As a result, there has been a shift in having more contractors than employees. The basic benefit being is that it is cheaper for the business to retain a contractor rather than an employee.

Whatever you decide, you will need robust agreements for both. The employment agreement will be subject to legislations such as the Employment Standards Act which set out basic standardized rights employees enjoy. Employers need to be careful that their agreements be in line with ESA, for if it is not, the financial repercussions can be substantial.

Contractor agreements are at its core a commercial agreement. Therefore, it will be set up as a commercial agreement. The freedom to contract very much applies to these types of agreements. Therefore, parties are able to contract to the terms they desire.

Closing Note

The above are the basic agreements every business should have. For larger businesses, more types of agreements or different versions of each type of agreements are required. But above are the fundamental agreements required to protect a business.

Ebady Law would be happy to assist with putting all or any of these agreements together.

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