Generally, business law refers to the rules that govern commercial interactions between persons or other certified entities. These rules can come from legislation, common law rulings, or agreements made through international conventions or treaties. Most business laws either regulate entity behavior (for example, bankruptcy and taxation), or regulate transactions between different entities.
But one of the unique things about business interactions is the importance and prevalence of contractual agreements between commercial entities. This is often known as a business to business commerce agreement, or more simply, a business agreement. General business agreements can control any number of commercial interactions such as purchasing goods from a manufacturer, purchasing goods produced by others, or purchasing services from another entity.
Can You Make a Verbal Business Agreement?
Verbal agreements can sometimes create legally binding contracts, but only if the proper legal elements of offer, acceptance, and consideration are present in the interaction. But there are some that by law must be in writing, which is known as falling under the Statute of Frauds. Contracts for the sale of real estate is one example, but more applicable to business matters require a written contract if the terms of the contract will take longer than one year to carry out or the sale of goods valued greater than $500.
Even if the transaction does not violate the Statute of Frauds, it is always a good idea to create a written document for a business agreement. If one party fails to fulfill their end of the bargain, it is much easier to enforce a written agreement in civil court if the non-breaching party needs to file a lawsuit. This greatly reduces the time and money both sides will spend disputing the transaction, because an agreement may not be enforceable. When in doubt, write it out!
What are Some Common Business Agreements?
Here are the most common types of business agreements:
- Ownership agreements. Can also be called partnership, founder, operating, or shareholders agreements depending on what type of entity is being formed. They detail the rights and responsibilities of owners and partners as well as basic company operation details and what happens if an owner leaves or the entity is dissolved.
- Supplier agreements. These detail the terms of the relationship between one entity and another, usually the price and amount of goods. They function to prevent unwanted situations with suppliers as withdrawal or failure to provide.
- Independent contractor agreements. A business may need to outsource to independent contractors, which can range from CPAs and web developers to temporary employees to perform company services. Because independent workers are not full-time employees, a written agreement is important to make sure that no complications arise in the future.
- Non-disclosure agreements. Used by entities to ensure that employees or even contractors know their role and what information they can and cannot share during or after their time with the company.
While these are some of the most common legal agreements you might see in a business law context, they can cover a nearly endless amount of topics as long as the elements are present and not prohibited by law. And while some contracts may not NEED to be in writing, it is ALWAYS a better idea to do so.
What is the Legal Difference Between an Agreement and a Contract??
The terms “agreement” and “contract” are often used interchangeably, but legally speaking they are two different things. An agreement is an understanding or arrangement between two or more parties. A contract is a specific agreement with terms and conditions that are enforceable in court. A business agreement is at its core an exchange of promises and can be either oral or written.
For example: the manager of Company A goes to the manager of Company B and asks them to supply a certain number of parts necessary for their product. Manager B agrees and they shake on it. This is an agreement, but not a contract. If the two managers sit down and write out that A will buy $1,000 of parts from B and both sign it, this is a contract. A contract has the weight of law behind it, but the agreement may not.
Do I Need an Attorney If I Need to Make a Business Agreement?
Business law matters often have significant resources on the line, so making sure that any transaction or other issue is properly taken care of is important. If you are looking to make a business agreement with another entity, be sure to consult a commercial attorney experienced in various aspects of business law matters.
An attorney in your area can assist you with drafting, reviewing, and analyzing a contract to make sure it meets all legal requirements. If a disagreement or dispute arises, your attorney can provide you with legal representation in court to help protect your business interests.