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Employment Offer Letters

One of the best ways to protect your business from legal liability and misunderstanding with an employee is to have an employment offer letter issued and sent to the prospective employee. The employee should then be required to sign it, evidencing the scope of the employment relationship between the parties. A good employment offer letter covers the following points:

• The particular job offer

• The responsibilities of the job

• The salary and the benefits

• That the employment is “at will,” meaning the employee can quit or the employer can terminate him or her at any time

• That the employee is required to sign a Confidentiality and Invention Assignment Agreement (discussed below)

• That the letter constitutes the entire agreement of the parties, and can only be amended in the future in writing, signed by the employer and the employee

Confidentiality and Invention Assignment Agreements

Employees have access to a company’s confidential information. Moreover, many businesses expect their employees to come up with ideas, products, business strategies, and inventions. Service Contracts If your company provides professional services as opposed to selling a product, it needs to have its own good, standard form Services Contract (which can be labeled many things, including an Agreement for Professional Services). This type of agreement lays out the terms and conditions under which you provide services and specifically spells out your responsibilities and liabilities. Gives you flexibility in completing the services, lists the fees for the job (and additional fees if you encounter unforeseen circumstances), and sets limitations on your liability (such as limiting that liability to the amount of the services fee). Sales Contracts Many businesses sell products and therefore need a good Sales Contract. The Sales Contract lays out the price, terms, and conditions for the sale of goods, equipment, or other products. Of course, some businesses (like the corner grocery store) don’t need Sales Contracts, but if your products sell for significant dollars, then you likely need a Sales Contract. The actual Sales Contract can take the form of the fine print on an order form or an invoice, or it can be tailor-made for a particular sale. You always want to start with your own form of contract. The key terms in Sales Contracts include price, price adjustments in certain events, responsibility for taxes, payment and credit terms, warranties to be given, disclaimers of various warranties, and liability limitations. Confidentiality Agreements Numerous instances arise in which you want to share confidential or proprietary information with another party. You may want to show the information to get them interested in doing a deal with you, investing in your company, or working together on some strategic arrangement. Producing an agreement to prevent the other side from stealing or using your ideas is very important in these situations.

Web Site Terms of Use Agreement

Most growing businesses have established (or should establish) a Web site to market their company and their products. Essential to these Web sites is a Terms of Use Agreement, which is intended to be a contract between the Web site owner and the users of the site and any purchasers of goods or services from the site. A good Terms of Use Agreement is essential for avoiding legal liability to the site owner.

Leases

A business lease for office or retail space is often one of the most significant contracts for a business. The starting place for most lease negotiations is the landlord’s alleged “standard” lease, which tends to be incredibly one-sided in favor of the landlord. Because the lease can constitute a major commitment for the business, you have to watch out for all the “gotchas.”

Loan Agreements

Many businesses enter Loan Agreements with banks or financial institutions and simply sign the lender’s “standard” form. The standard form tends to be very one-sided in favor of the lender, with various restrictions on the borrower. The borrower under a Loan Agreement needs to fully understand (and negotiate better terms than those contained in the standard form) a number of key issues, including the following:

• The total cost of the loan

• The payment schedule

• The right to prepay the loan without penalty

• The flexibility on the use of the loan proceeds

• The right to cure defaults

• The appropriate representations and warranties of the borrower

• The covenants that can trigger a default

Respond to the questions below, select the Forum link, then click on Create Thread and type in your posting. To respond to a minimum of 2 classmates, first, click on one of their postings, read it, and then select REPLY. Please type your NAME in the Subject field.

1. What next information did you learn from this article that will be useful to you in the type of business that you work in currently or plan to work in?

2. What other types of contracts exist that were not included in this article that you have seen or know exist and what are they used for?

3. I have used “Legalzoom.com” to purchase contracts to use in business. I have known some business owners who don’t want to pay a lawyer $500 + an hour to draft contracts when starting a business and contract business without them for years. There are many risks you will make running a business or being a business owner. In your business what decision would you make regarding using contracts? Explain why?

4. Many times I have done business transactions with other businesses and customers which involved contracts. There are times when I read contracts and read the “fine print” I am unable to understand much of the legal words and jargon but I sign anyway. Some contracts are so long and detailed that it would take hours just to review. Have you experienced this? Discuss an example of an occasion you lived. Talk about what type of contract it was, how where you were involved and what did you do to understand or explain the contract to another party?

5. When a contract is not involved in a sale transaction it is considered an “as is sale.” Sometimes sales are conducted with no recourse for closeout merchandise stated as “all sales final.” These types of transactions can be good or bad for the seller and the buyer. How would you explain this, include reasons and examples to support your views and defend them?