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Key takeaways
Well-drafted contracts provide legal protection, clarity, conflict resolution, risk management, professionalism, regulatory compliance, and documentation, reducing legal disputes and ensuring smooth business operations.
Essential business contracts include real estate, healthcare, finance, marketing, HR, procurement, and sales contracts.
Use document automation tools like Docupilot to streamline contract creation, manage templates, and automate updates, saving time and improving accuracy.
No matter how fast your business is growing, a single contract mistake can set you back.
The U.S. Chamber of Commerce research reveals that US businesses lost $347 billion to legal issues in 2021. This makes it essential for businesses of any size or industry to invest in well-drafted, legally sound contracts for every transaction to protect your interests and ensure smooth operations.
Curious to know the contract types your business needs? Keep reading to explore some contract examples your business needs with customizable templates to save you time and effort.
What is a Business Contract?
A business contract is a legally binding agreement between two or more parties that outlines their rights and obligations in a business transaction. While factors like contract complexity and time constraints may discourage businesses from using them, the benefits are worthwhile. Key benefits of a business contract include:
- Legal Protection: Clearly outlines the terms and obligations of each party, safeguarding against potential disputes and providing recourse in case of a breach.
- Clarity and Precision: Defines specific terms, conditions, and expectations, ensuring that all parties have a clear understanding of their roles and responsibilities, and reducing misunderstandings.
- Conflict Resolution: Acts as a reference point to resolve disagreements, providing a basis for resolving disputes based on agreed-upon terms.
- Risk Management: Identifies and mitigates risks by setting out conditions for obligations and consequences for non-compliance.
- Professionalism: Adds a layer of professionalism to business transactions, enhancing trust and credibility between parties.
- Regulatory Compliance: Helps meet legal and regulatory requirements, supporting lawful operations and avoiding legal penalties.
- Documentation and Record Keeping: Provides a documented record of business transactions, useful for auditing, performance tracking, and maintaining historical records.
Note: In business transactions, even without a formal written contract, an implied contract may exist based on the parties’ actions and agreements. However, implied contracts often lack the clarity and specificity of written contracts, leading to ambiguity. Therefore, it's important to draft your contracts intentionally.
Examples of Business Contracts
Here are some key business contracts you may need, along with templates to get you started:
Rental agreement
If you're a property owner (landlord), a rental agreement is crucial to create a legal bond between you and your renter (tenant). This agreement requires you to specify when rent is due, how it should be paid, and what penalties exist for late payments. Based on your and the tenant's preferences, you can specify whether the agreement is for a fixed term, like a year, or a month-to-month basis.
In addition to rent, include provisions for a security deposit, detailing how it will be used, such as for repairs or unpaid rent, and the conditions under which it will be returned at the end of the lease. Also, outline the tenant’s responsibilities for maintaining the property and the landlord’s duty to ensure the property remains habitable.
Other common clauses cover utility payments and restricted areas as highlighted in this template.
Non-disclosure agreement (NDA)
NDAs are essential for business activities such as negotiations, product development, and partnerships, where protecting confidential information is crucial. They prevent receiving parties from sharing or using the disclosing parties' proprietary information without permission. Confidential information can include trade secrets, business strategies, client lists, or financial details.
These agreements come in two forms: unilateral, where only one party discloses confidential information, and mutual, where both parties share sensitive information.
Regardless of the type you're drafting, clearly define the scope of confidentiality and include a time frame for maintaining confidentiality, which may be indefinite for certain sensitive data.
Include a clause for ‘exclusion from confidentiality’ to specify any exceptions, such as publicly available information or data already known to the receiving party. Consider limited disclosures for cases where others, like employees or contractors, need access to the information, provided they are also bound by confidentiality.
Use this template to ensure you include all essential clauses in your NDA without the stress of drafting them from scratch.
Loan agreement
Whether you're a business borrowing money to fund operations or a financial institution providing the loan, a loan agreement outlines the terms for offering and repaying loans to protect both parties' interests.
When creating a loan agreement, clearly state the loan amount, interest rate, and repayment terms. Define the repayment schedule, which may involve regular installments or a single lump sum payment at the end of the loan term. Indicate whether the loan is secured by collateral, such as property or other assets, which the lender can seize if the borrower defaults.
Other clauses to include as highlighted in this template are consequences of default, and governing law.
Lease termination contract
Since a rental agreement is legally binding, terminating it before the contract expiration date without following agreed conditions constitutes a breach. However, if both parties agree to end the lease early, formalizing this decision with a lease termination contract can help avoid disputes.
In the contract, specify the terms for releasing both parties from their obligations. The specifics of the contract can vary based on whether you’re dealing with residential, commercial, equipment, or land leases. For instance, a commercial lease termination might include additional clauses related to equipment, signage, or business operations.
Regardless of the type of lease termination, this template is an excellent starting point.
How to Create a Business Contract Using Docupilot
Creating business contracts with Docupilot is simple and efficient. Here’s a step-by-step guide to help you get started:
Step 1: Create an account
If you're new to Docupilot, start by creating a free account. Enter your name, email ID, and password to sign up. You’ll be directed to the Docupilot home page.
Step 2: Choose a pre-made template
The templates mentioned above are just a few examples of what Docupilot offers. There are many more templates available for different industries and use cases. To explore them, click the ‘Template’ tab on the home page.
Then, select ‘Pick from Library’. You can scroll through the list of templates or use the search bar to find one that suits your needs.
Once you’ve selected a template, give it a name and description, adjust the output format as needed, and click ‘Create Template’ to preview it.
Can’t find a suitable template? No worries.
Use Docupilot's AI Template Generator to create a contract from scratch. Just describe the contract you need, and the tool will quickly generate a customized template for you.
Step 3: Edit your template
Once you’re on the preview page, click ‘“Download’” to save the template.
Open the file in Microsoft Word and make any necessary edits to customize it for your needs.
For a one-time contract, this might be all you need to do. However, if your business regularly generates contracts and manually updating templates becomes too time-consuming, Docupilot’s automation features can help simplify the process. In that case, proceed to the next step.
Step 4: Upload your template
After editing your template in Microsoft Word, upload it to Docupilot by selecting ‘Build from Scratch’ and choosing the appropriate format.
Step 5: Insert dynamic fields
Dynamic fields are placeholders that help personalize your contracts. In Docupilot, identify the sections of your contract that require modifications, then click the curly bracket icon to insert tokens for data like names, addresses, dates, and amounts.
Tokens are likely already included in your chosen template, so you might not need to add any new ones. To view and edit existing tokens, simply click the circle button above the curly bracket in the template page.
Additional merge fields you can use include:
- Conditionals: Use if-else statements to control the inclusion of specific information, such as warranty terms.
- Loops: Repeat data for agreements that involve multiple products or services.
- Tables: Organize data into rows and columns (e.g., product details) for better structure and clarity.
Step 6: Test your template
Once you've set up your template, test that it works fine by clicking the ‘Test’ tab.
Enter data in the form provided and click ‘Test’ below the page.
Docupilot will download your contract with your data in place of the placeholders.
Step 7: Create bulk contracts
To automate the merging process, select the ‘Bulk merge’ tab and integrate Docupilot with data sources like Hubspot, Excel, or Airtable.
As you update your data sources, Docupilot will automatically generate customized contracts.
Protect Your Business With Effective Contracts
Well-drafted contracts are crucial for protecting your business and avoiding costly disputes. While creating these documents can seem daunting and time-consuming, Docupilot simplifies the process.
With premade templates and Docupilot's AI to build templates, contract drafting has never been easier. Additionally, you can set up an automation to generate contracts with minimal manual effort.
Sign up for Docupilot today to access customizable templates and automate your contract creation process.
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