Different Types of Business Contracts for SMBs in the United States

Mar 3, 2024 | All articles, Contract signing online, eSign signature software, eSignature contract online

What is the importance of right business contracts?

Business contracts are essential for any business, regardless of size or industry. They can help to protect your interests, define the terms of a transaction, and avoid disputes.

For small and medium-sized businesses (SMBs) in the United States, it is especially important to understand the different types of business contracts that are available. This will help you to choose the right contract for your needs and protect yourself from legal liability.

The most common types of business contracts for SMBs in the United States:

  • Sales contracts: Sales contracts are used to sell goods or services to another business. They typically include terms such as the price, quantity, delivery date, and payment terms.
  • Purchase contracts: Purchase contracts are used to buy goods or services from another business. They are similar to sales contracts, but they are from the perspective of the buyer.
  • Service contracts: Service contracts are used to provide services to another business. They typically include terms such as the scope of services, the fee, and the payment terms.
  • Employment contracts: Employment contracts are used to hire employees. They typically include terms such as the job title, salary, benefits, and termination conditions.
  • Lease agreements: Lease agreements are used to rent property from another business. They typically include terms such as the rent, the lease term, and the security deposit.
  • Partnership agreements: Partnership agreements are used to create a partnership between two or more businesses. They typically include terms such as the contributions of each partner, the management structure, and the distribution of profits.
  • Franchise agreements: Franchise agreements are used to grant one business the right to operate another business’s brand. They typically include terms such as the franchise fee, the royalty payments, and the marketing and advertising obligations.

When choosing a business contract there is important factors to consider:

  • The nature of the transaction: What are you buying or selling? What services are you providing?
  • The parties involved: Who are the contracting parties? What are their respective rights and obligations?
  • The jurisdiction: Where will the contract be governed? What laws will apply?

It is also important to have a lawyer review any business contract before you sign it. A lawyer can help you to understand the terms of the contract and ensure that it protects your interests.

Here are some additional tips for SMBs when negotiating business contracts:

  • Do your research: Before you start negotiating, be sure to understand the industry standards for your type of transaction. This will help you to negotiate a fair and reasonable deal.
  • Be prepared to walk away: If you are not happy with the terms of the contract, be prepared to walk away from the deal. It is better to walk away than to sign a contract that is not in your best interests.
  • Get everything in writing: Once you have agreed on the terms of the contract, be sure to get everything in writing. This will help to avoid disputes down the road.

By understanding the different types of business contracts that are available and following these tips, you can protect your interests and avoid legal liability.

Examples of Business Contracts for Specific Situations:

Here are some examples of business contracts commonly used in specific situations:

  • Freelance Contract: Used for hiring freelance contractors, defining the scope of work, fees, and deadlines.
  • Independent Contractor Agreement: Used for engaging independent contractors, outlining the terms of engagement, payment structure, and liability limitations.
  • Non-Disclosure Agreement (NDA): Used for protecting confidential information, restricting disclosure to authorized parties.
  • Material Transfer Agreement (MTA): Used for transferring ownership of tangible materials, such as equipment or prototypes.
  • Software License Agreement (SLA): Used for granting permission to use software, outlining usage rights and limitations.

Examples of content Topics for different Situations:

In addition to the key considerations and examples provided, here are some new topics for further exploration related to business contracts for SMBs:

  • International Business Contracts: Explore the nuances and considerations for SMBs engaging in international transactions.
  • Contract Management Software: Explore the benefits and features of contract management software for SMBs to organize, track, and manage contracts efficiently.
  • Contract Negotiation Strategies: Delve into effective negotiation strategies for SMBs to secure favorable terms and protect their interests.
  • Contract Dispute Resolution Mechanisms: Examine various dispute resolution mechanisms, such as mediation, arbitration, or litigation, and their suitability for SMBs.
  • Contract Compliance and Regulatory Requirements: Understand the importance of complying with relevant laws and regulations governing business contracts in specific industries or jurisdictions.

Examples of Essential Elements of a Contract:

A legally binding contract typically includes the following essential elements:

  1. Offer: A clear and definite proposal from one party to another, outlining the terms of the agreement.

Example: A company offers to sell 100 units of a product to a customer for $50 per unit.

  1. Acceptance: The unequivocal acceptance of the offer by the other party, indicating their agreement to the proposed terms.

Example: The customer accepts the company’s offer by placing an order for 100 units of the product at $50 per unit.

  1. Consideration: The exchange of something of value between the parties, such as goods, services, or money.

Example: The company provides the product to the customer, and the customer pays the agreed-upon price.

  1. Mutual Agreement: A meeting of the minds between the parties, indicating their understanding and consent to the terms of the contract.

Example: Both the company and the customer understand and agree to the terms of the sales contract, including the price, quantity, and delivery date.

  1. Capacity: The legal ability of the parties to enter into a binding agreement. This ensures that the parties are of legal age, mentally competent, and not under any undue influence or duress.

Example: Both the company and the customer are legally capable of entering into the sales contract.

  1. Legality: The contract’s purpose and terms must not violate any applicable laws or regulations.

Example: The sales contract does not involve any illegal goods or services, and the terms comply with trade and consumer protection laws.

Examples of additional Contract Clauses and Provisions:

In addition to the essential elements, contracts often include various clauses and provisions to address specific circumstances or protect the interests of the parties. Some common examples include:

  • Scope of Work or Services: Clearly defining the scope of work or services to be provided, including deliverables, timelines, and expectations.

Example: A service contract for web development outlines the specific website features to be developed, the deadline for completion, and the acceptance criteria.

  • Payment Terms and Conditions: Detailing the payment terms and conditions, including payment methods, timelines, and any applicable taxes or fees.

Example: A purchase contract specifies the payment method (e.g., bank transfer, credit card), the payment schedule (e.g., upfront payment, installments), and any applicable taxes or duties.

  • Confidentiality and Intellectual Property Rights: Protecting confidential information and intellectual property (IP) rights, especially when dealing with sensitive information or proprietary technologies.

Example: A non-disclosure agreement (NDA) restricts disclosure of confidential information to authorized parties, and a material transfer agreement (MTA) defines the ownership rights of tangible materials or prototypes.

  • Termination Clauses: Outlining the conditions under which either party can terminate the contract, including notice periods, return of assets or property, and termination fees.

Example: An employment contract specifies the grounds for termination, such as breach of contract, poor performance, or misconduct, and the notice period required for termination.

  • Dispute Resolution Procedures: Establishing mechanisms for resolving disputes or disagreements arising from the contract, such as mediation, arbitration, or litigation.

Example: A commercial contract may include a clause specifying that disputes will be resolved through binding arbitration.

Importance of Comprehensive Contracts:

Thorough and well-crafted contracts play a crucial role in protecting the interests of businesses, ensuring clear communication of expectations, and minimizing the risk of legal disputes. By carefully considering the essential elements, additional clauses, and potential risks, businesses can safeguard their assets, maintain positive business relationships, and operate with greater confidence.


This article is intended to provide general information about business contracts for SMBs in the United States. It is not intended to be legal advice. Please consult with an attorney to discuss your specific needs.

The information contained in this article is accurate to the best of our knowledge, but it may not be complete or up-to-date. We make no warranty, express or implied, as to the accuracy or completeness of the information contained in this article.

You should not rely on the information contained in this article as a substitute for legal advice. Please consult with an attorney to discuss your specific needs.

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