8 Types of Business Contracts

Kamran Shafii |

There are different types of business contracts. Knowing which one you need and when is important, so we’ve put together this guide to help. It covers eight different types of contracts and explains how and when to use each one. 

1. Service Contracts

Of the many different types of contracts in business, the service contract is one of the most popular. This document establishes the relationship between a service provider and their client. It details the terms of service and expected compensation.

Service contracts are standard across industries. You can find them from plumbing and contracting to law and business services.

With service contracts, both parties must have an unambiguous written agreement. This helps avoid misunderstandings, such as those related to the terms of service. They also need an efficient way of creating these contracts, as one business often has many service providers. 

Digital templates and electronic signatures let businesses create a valid contract on the go so work can begin faster.

2. Sales Contracts

Sales contracts are another of the most common types of business contracts. They define all critical details of the sale, including:

  • Names and contact information for both parties
  • A description of the product or service
  • Payment terms and amounts due
  • Any contingencies, such as a warranty or guarantee
  • Conditions for completion of the sale

Some sales have additional legal requirements. For example, if a buyer finances a car sale, the sales contract will include loan details. 

If you do business in a regulated industry, be sure to understand all requirements for sales contracts.

3. Lease Agreements

You’ve probably encountered a lease even if you’ve never signed any other contract agreement. Most people renting an apartment or house have signed a lease.

These common agreements are residential leases. The same types of legal contracts also exist for commercial properties.

Commercial lease agreements are more complex than residential leases. But residential leases include more tenant protections. For example, residential landlords are responsible for keeping the space habitable. Conversely, commercial property owners may require the tenant to take on maintenance costs.

If you plan to sign a lease as an owner or tenant, take the time to understand all lease terms. When in doubt, consult a property law firm.

4. Partnership Agreements

A partnership agreement is a contract that details how a small business will run with two or more owners. There are three main types of partnership agreements:

  • General Partnerships: All partners share responsibility for business gains and losses 
  • Limited Partnerships: One partner has unlimited liability for business losses, while limited partners protect their assets
  • Limited Liability Partnerships: All partners receive protection for their personal assets, which the law can’t use to cover non-malpractice losses

Because partnership agreements can have serious financial consequences, discussing the terms in detail before signing is essential.

5. Employment Contracts

An employment contract establishes the business relationship between an employer and an employee. It’s a binding agreement that protects the interests of both parties.

An employment contract includes all details of the position, including:

  • Job title and responsibilities
  • Compensation and benefits
  • Paid time off policies
  • Employer regulations
  • Dispute resolution policies
  • Termination procedures

Businesses often ask new hires to sign employment agreements before starting work. Fortunately, the process is more convenient and secure now that it’s possible to sign documents electronically.

6. Non-Disclosure Agreements 

non-disclosure agreement (NDA) is a common business contract. It prohibits sharing sensitive information. Some users may call this type of contract a confidentiality agreement.

NDAs are often part of employment contracts. This is because new hires have access to sensitive information, such as intellectual property or confidential client information. An established employee may also need to sign NDAs if their role or access changes.

Sometimes, companies may ask investors, prospective buyers, or suppliers to sign NDAs. Violating a signed NDA can have serious legal consequences.

7. Licensing Agreements

Licensing agreements are legal documents that allow one party to earn revenue from the other’s intellectual property.

For example, an entertainment company might sign a licensing contract with a toy manufacturer, allowing the manufacturer to sell action figures representing the company’s characters. The developers of the characters would earn agreed-upon revenue from the sale. And the manufacturer would enjoy the name and brand recognition.

License agreements often include specifications on how the licensee can use the licensed property. For instance, in the above scenario, the licensor may ask the licensee to seek approval for all new toy designs. A signed and valid contract protects both parties’ interests.

8. Franchise Agreements

franchise agreement allows a third party to sell products or services using the name and brand of an established entity. Many well-known fast-food chains operate using a franchise model. Examples include McDonald’s and Taco Bell

The franchisee typically assumes the legal risk of operating the franchise. In exchange, the franchisee benefits from using a well-known name and brand identity.

Any successful business may expand using the franchise model. All you need is a valid contract that the franchisee and franchisor are willing to sign. Thanks to online signatures, this can happen without the delay of a physical mailing.

Leverage jSign for All Your Business Contracts

Running a business means handling many legal agreements. Now that you’ve mastered some of the most common types of business contracts, you’re ready to face the challenge.

Adopting electronic signatures is one way to simplify business agreements. Electronic signatures make it easier for businesses to complete contracts digitally. They streamline and speed up the process of digital document management.

If you’re considering adopting digital signatures for your business contracts, jSign is here to help. We use advanced blockchain technology to record and track all contract types that go through our system, so you can be confident everything stays safe and legal.

jSign is your partner in any business contracting process you need to handle. Reach out today to learn more about how we keep your contracts safe, so you can focus on running your business.

Kamran Shafii
Manager, SEO Content