What Is a Business Agreement?
A business agreement is a contract of agreement that sets out in legal terms how a good or service will be provided and the responsibilities of all those who are parties. It is in a sense, a way of formalizing a business relationship.
An Agreement Is Used to
- formalize an idea or arrangement
- document an arrangement for the provision of a service or product
- fix a price for the provision of a good or service
- ensure outcomes of a negotiation are legally enforceable
- a base for legal enforcement
Types of Business Agreements
There are several types of business agreements that are used for formalizing a business relationship. Some these agreements are listed below:
- Corporate accounts
- Service contracts
- Agency agreements
- Venue contracts
- Rate negotiations
- Marketing agreements
- Preferred product agreements
Formal or Informal?
Business agreement could be formal or informal. The need for the type of agreement will depend on the nature of the business relationship. What is the level of risk for both sides? Larger organizations usually required formal agreements because there is a lot of value at stake. As a result, there is a need for legal recourse: The ability to take legal actions if things do not turn out as per the agreed terms.
Small businesses often come to informal agreements on a regular basis. One example is as such: Two neighboring coffee shops have tables out the front. There is limited room. The owners come to an agreement that the first coffee shop can have all the room out the front, once every first month of the year for functions, and the second shop, once every second month. This benefits both shops. Competitors do not have to be enemies
Finalizing an Agreement
In the process of finalizing an agreement you should follow the following procedures:
- Ensure all parties involved are happy with the terms described
- It is important both parties agree to the terms of the agreement before each party put their signature on the agreement document
- Only legally binding if signed by both parties
- Every written agreement or contract has a time line for this particular agreement to last
- As this period comes to a close - there is an opportunity to renegotiate the terms and conditions of the agreement
- It is important the agreement is monitored for compliance to the terms and conditions