Introduction

Navigating the business world without the right contracts is like driving without a map—you might eventually get where you're going, but you'll likely take a few wrong turns along the way. From onboarding employees to managing supplier relationships, having the right legal documents is essential. They ensure you not only stay on course but also avoid any unnecessary detours.

Here are the top five contracts that every small to medium-sized business should have ready to go, helping to protect their interests and keep things running smoothly.

Read: Why you need clear payment terms in your business contracts

Service agreements and statements of work

Having a solid client or service agreement helps streamline operations. This contract specifies what services you’re performing, how you’ll be paid, who owns the intellectual property in anything you’re creating, as well as other important points to govern your customer relationship.

Why you need it: This document lays down the law of the land between you and your client, ensuring that both parties know the general rules and protections in place throughout your business relationship.

While the service agreement sets the stage, the statement of work (SOW)—sometimes called an “order form”—acts as the director, detailing the specifics of your project. The SOW outlines the precise scope of the project, including timelines, specific tasks to be completed, deliverables, and detailed requirements for the project at hand. It's more dynamic than the service agreement and can change from project to project even with the same client.

Why you need it: The SOW ensures that everyone involved knows exactly what to expect in a particular project. It prevents scope creep by clearly defining what will be delivered, when, and how, making it an essential tool for project management and client satisfaction.

In practice, the SOW or order form will be added as a “schedule” or “addendum” to your service agreement. The service agreement provides the legal backbone, protecting your broader interests during your customer relationship, while the SOW dives into the nitty-gritty of a particular project.

Together, they form a comprehensive contract that minimizes risks and aligns expectations, helping you manage projects more efficiently and effectively.

Non-disclosure agreements (NDAs)

In the game of business, information is king. Non-disclosure agreements (NDAs) serve as the knights protecting your king—your valuable business secrets. Whether you’re discussing a potential partnership or onboarding a new customer, NDAs ensure that the sensitive information you share remains under wraps.

An NDA is a contract that puts in a place a confidential relationship with another party. It clarifies what information is confidential, who’s involved in sharing such information, and what the promise to keep the information confidential entails.

Why you need it: In today's fast-paced business environment, safeguarding your secret information is crucial. NDAs protect against information theft, keeping your business innovations, strategies and secrets safe from competitors and public disclosure.

In short, having NDAs in your business dealings is like installing a securing system in your home; it provides you with peace of mind and reduces the chances of others misusing your confidential information. And, as we know, there’s nothing like peace of mind when growing your business.

Read: When should I hire a lawyer for my contracts?

Vendor agreement

Next, we have vendor agreements—those magical pieces of paper that make sure the goodies you ordered actually show up, and in the right condition. Whether it's coffee beans for your café or software for your startup, these contracts are the unsung heroes of the supply chain.

Why you need it: Imagine ordering a bunch of laptops for your team, and instead, you get a box full of bricks. Not cool, right? A vendor agreement is your recipe for avoiding such disasters. It lays out what you’re buying, how much it’s gonna cost, and when you can expect delivery. Plus, it covers what happens if things go south—like if those laptops you ordered show up looking like they've been used as footballs.

Vendor agreements keep things clear and cordial with your suppliers. They’re like a handshake, but with a lot more oomph. You get peace of mind knowing exactly what you’re getting into, and there's something written to wave around if someone doesn’t hold up their end of the deal.

Employment contracts

Building a stellar team starts with clear and concise employment contracts. Think of them as the user manuals for your employees. These nifty documents spell out everything from what your team members should be doing (so no one's just "supervising the coffee machine"), to much they’ll be paid.

They cover the must-knows like job roles, salaries, work hours, vacation time (because everyone needs a break), and the dos and don'ts that could lead to saying goodbye.

Why you need it: Ever played a game where nobody knew the rules? Chaos. Employment contracts set the rules from day one, preventing "I thought I could leave at 3 PM" kind of surprises. They protect your business and give your team members the security blanket they need to work happily. Plus, they keep you in line with employment laws so you're not accidentally stepping on legal landmines.

In short, a well-drafted employment contract can save your business from potential HR headaches by setting clear expectations and legal boundaries from the outset.

Read: The pros and cons of using standard contract templates

Website terms and conditions

Online website terms and conditions are the backbone of your website, laying down the law for what visitors can and can't do with your precious content, products, or services. Think of them as the "please and thank yous" of your digital domain. Website terms and conditions usually cover areas like copyright, restrictions, limitation of liability, user behavior and data privacy.

Why you need it: Terms and conditions protect your intellectual property and govern users’ behaviour by informing them how they should behave. This is especially important if you’re an e-commerce platform, where transactions occur frequently. They also help enforce rules about acceptable use of your website, which can prevent abuse and mitigate legal risks.

In essence, your website’s terms and conditions act as the rulebook for your online presence, ensuring that users engage with your content responsibly and legally.

Read: What are boilerplate clauses?

Conclusion

Crafting and maintaining solid contracts isn’t just a legal formality—it’s a critical component of your business strategy. These documents are your best friends in safeguarding your business’s interests, ensuring smooth operations and fostering strong professional relationships. So, give those contracts the attention they deserve, and watch as they help you steer your business towards success.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.