Wednesday 3 May 2017

Some basics about Business Agreements

Most agreements which are formed between any businesses or collaborations can be considered business agreements. Agreement is a prerequisite of any valid contract, payment, compromise, variation or discharge of contract or conveyance. Business Agreements can be written as well as verbal but the written agreements provide more certainty for both parties than verbal agreements. They clearly set out the details of what was agreed. It can be written or oral but written agreements provide more certainty to both the parties than verbal agreements. And the most beneficial part being it serves as a record which reduces possibility of ‘future’ disputes.

There are basically twelve types of business agreements which cover almost all the areas of business practices such as (i) Rent Agreement, (ii) Partnership Deed, (iii) Franchise Agreement, (iv) Employment Agreement, (v) Service Level Agreement, (vi) Confidentiality Agreement, partnership, rent agreements etc. Some of the popular business agreements have been discussed in detail below –

1.  Rent Agreement – When a Landlord gives the tenant, right to possess its premises (whether residential, commercial, industrial or any other), a contract is made between both the parties stating the terms and conditions of the premises occupied, known as Rent Agreement which cannot be amended or modified unless both parties agree to the same. Since, rent agreement defines the relationship between landlord and tenant; it should be in writing although it can be explicit or tacit.

2.     Partnership Deed – When two or more person enters into a partnership, then to avoid any kind of coercion, disagreement or unacceptability a written legal document is prepared known as Partnership Deed and which is made under the Indian Registration Act, 1908 so that this deed cannot be apprehended, destroyed or violated in the possession of the partners. In case future disputes prove difficult to arbitrate, this deed helps to resolve any contention between the partners.

3.      Franchise Agreement – Franchisee has been granted right to use the franchisor’s system and can operate franchised business as owner of the business but may be restricted to certain locations and locating another business nearby. For this very purpose, a legal document should be prepared called franchise agreement in which all the payment terms, agreement renewing provisions or any restrictions pertaining to transfer of the franchise should be clearly specified.

4.    Employment Agreement – An Employment contract is an agreement between an employer and employee that sets out terms and conditions of employment and is the basis of the employment relationship. A contract can be in writing or verbal but the advantage of a written agreement is that it outlines the terms and conditions agreed to by both parties i.e employer as well as employee and also it saves a lot of potential misunderstanding further down the line. Most employees are legally entitled to a Written Agreement of the main terms and conditions of employment. It is a formal agreement that specifies the conditions of the relationship between an employee and an employer including compensation and expectations. Also referred to as employment contracts, they are often executed for a specified period of time, such as one year.


5.      Service Level Agreement – Service Level measures the performance of a system, certain goals are defined and the service level gives the percentage to which those goals should be achieved. Fill rate is different from the service level. Percentage of calls answered in a call centre. SLA is a contract between the person who is providing the services and the ultimate consumer of those services, stating the degree of services expected from the provider of services. How the service itself is delivered or provided does not included in the definition of SLAs. However, actual measurements for each SLA differ depending upon the provider of the services, uniformly covered areas, quality and quantity of work, quick receptiveness and competence. The Agreement aims to builds common understanding, responsibilities, areas prioritized, warranties and guarantees given by provider of services. This can be legally binding formal or informal ‘Contract’ (for example, internal department relationship(s). The agreement may involve separate organizations, or different teams within one organization.

Have a great day ahead!


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