Make business contracts

There is a wide range of contracts that often need to be used in the course of business. Ensure that you only use professionally written agreements to protect your business interests.

Before you enter into a formally binding contract, a Letter of intent (or Heads of terms) can help to set out the key terms of the potential agreement. Meanwhile, a Non-disclosure agreement can ensure that confidential information discussed in the course of negotiations remains confidential. If a service is being provided between two businesses, a Services agreement should set out the terms. When it comes to business expansion, a Distribution agreement, Sales agency agreement or Subcontracting agreement can help you retain some degree of control. At the end of a contract, you'll need to give appropriate notice in a Contract termination letter - or you may decide to transfer the benefits of a contract to another business using a Letter assigning a contract.

A Letter of intent, sometimes known as a memorandum of understanding, is a non-legally binding letter, which states the key terms of a contract under discussion and includes a target signing date. It can be used as a roadmap for a number of different deals - eg a major services or outsourcing agreement, sale of a business or a licence agreement. It can set out a range of matters which need to be completed or secured prior to signing, such as a due diligence exercise or consent from the board of directors. It helps to smooth the way for further negotiations and a final agreement. Although it's not legally binding in terms of requiring a final agreement, a letter of intent can contain certain legally binding clauses dealing with matters such as confidentiality and employee poaching.

A Heads of terms document is essentially the same as a letter of intent, except that it's drafted as an agreement between two businesses rather than as a letter. Again, it records proposed terms that have been provisionally agreed during negotiations between the two businesses. Although it only sets out provisional terms, it can also contain legally binding clauses dealing with matters such as confidentiality, exclusivity and non-solicitation.

When discussing a potential deal with another business it may be necessary to disclose various types of confidential information such as trade secrets or commercial plans. In order to ensure that you continue to protect certain information and that the other business only uses it for the purposes of deciding whether to enter into the deal you're discussing, you can use a confidentiality agreement, also known as a non-disclosure agreement or NDA. You can either use a One-way confidentiality agreement (if only one business is disclosing confidential information) or a mutual Non-disclosure agreement (if you're both sharing sensitive information).

As a main contractor, you may decide that you want another business to undertake some of the work on your behalf. This process is known as subcontracting. After you've checked whether you are actually allowed to subcontract under the main agreement, a legally binding Subcontracting agreement sets out in clear and simple terms the process to be followed for the provision of services through other persons or companies. It details matters such as the nature of the subcontracted services, price and payment, liability and how to end the contract. You must make sure that the subcontracting agreement mirrors the terms of the main contract and that you are properly protected if the business you are subcontracting to fails to perform. If in doubt, Ask a lawyer.

Sometimes a company may need to borrow money to help its cash flow or increase its working capital. A Loan agreement is an essential document in facilitating the borrowing and lending of money from one business to another. It clearly outlines how and when the loan will be repaid, any interest payable and what happens in the event of default.

Businesses sometimes use or publish images with individuals on them. For example, a business may want to use a person's photo for advertising or marketing purposes. However, there are risks involved with using images of people without their consent and all businesses must exercise caution. Use a Model release letter to obtain express consent from the individual whose image you want to use. This will protect you from any liability and will ensure you comply with any data protection laws. For further information, read Model release letters.

Some business contracts won't be legally binding unless they are signed and witnessed as a deed. Some examples are shareholders' agreements, partnership agreements and some employment contracts. Note that in Scotland, deeds do not have the same meaning as they do in England and Wales. In Scotland, a deed must show an intention to create legal relations and should have a certain level of formality. For more information, read Executing a deed to help you decide whether you need to sign a document as a deed and the process for doing so.