Understanding 3 Common Kinds of Contracts

Contracts are a major part of every industry, but they’re also a source of stress for many inexperienced business owners. If you’re facing an upcoming negotiation, and you’re not sure how to prepare, you can start by gaining an understanding of three of the most common types of contracts — sales agreements, service agreements, and non-disclosure agreements.

Sales Agreement

A sales agreement is exactly what it sounds like — a contract outlining the sale of a product between parties. This type of contract is often drafted in high-value transactions, and like every other contract, it’s essential because it protects all parties involved.

This protection is provided by the clear description of each party’s responsibilities that the contract must include. Every contract, in fact, should include this information — as well as information about dispute resolution, contract termination, and key objectives. To ensure that each of these items is adequately addressed in the contract, you should do some research before negotiations and draft tentative suggestions for phrasing.

Service Agreement

Another common kind of contract is a service agreement. A service agreement is similar to a sales contract, but rather than dictating the transaction of a product, it dictates the transaction of a service. As such, a service agreement will usually include more details surrounding the agreed-upon delivery, since there are more variables in delivering a service than a product.

When negotiating a sales agreement — or any contract — you should ensure that any included financial information is up-to-date. To calculate accurate figures, you can use an accounting system that provides insights into your company’s financial well-being. This program may also offer a single point of access to all the financial figures you need, including daily cash flow.

Non-Disclosure Agreement

Confidentiality can be a major concern in negotiations, and some parties may request a non-disclosure agreement to accompany any other contracts signed. Sometimes, though, an NDA is a standalone contract that’s used to ensure that one or both parties don’t discuss sensitive information. This can help protect business interests and ensure the contract’s integrity is intact.

An NDA may intentionally omit or censor the names of people involved, but in most cases, branding is advantageous for a contract. Embellishing a contract with your company logo can make it recognizable, and using that same logo across your invoices and documents is a great way to create consistency. Check into a logo design maker that you can use yourself, thereby sparing yourself the expense of a graphic designer. Start by choosing a style and an icon that represents your brand. Customize the font and color to make it unique yet professional.

Strengthening Your Hand

Now that you have a good grasp of the basics when it comes to accounting, don’t forget that every aspect of your business is connected. In other words, by strengthening one area – marketing, for instance – you boost the overall health of your business, leaving you in a much better position to negotiate. If you’re new to marketing, spreading the word via social media is a great way to save money, but that will only get you so far. Spend a little time with this marketing budget calculator to plan your next move.

Understand Contracts Before You Negotiate

The best way to prepare for an upcoming negotiation is to review general information about contracts and conduct research about the other party. You want to ensure that you’re negotiating with an authority in the company, and you want to be confident that they’re trustworthy, too. When you do this, you can better understand the other party’s needs and motives — which, in turn, can lead to more productive negotiations. Leverage tools like an online logo maker and an accounting software suite to make your contracts look more professional. Even a beginning business owner can enter negotiations assuredly with these tips.

Dr. Diana Rangaves is a pharmacist, philanthropist, and ethics professor turned writer. An accomplished educator, award-winning teacher, and business professional, she uses her powers for good. Call (707) 494-2696.

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