Four Contracts Every Entrepreneur Should Know About
Short 'n' sweet, and in plain English, this post digs into four contracts every entrepreneur should know about, their purpose, and common terms to look out for.
1. Confidentiality Agreement (also “NDA” or “Non-Disclosure”)
Purpose
Just about every entrepreneur should know about NDAs. (Also called Confidentiaity Agreements or Non-Disclousure Agreements.) When drafted the right way, a Confidentiality Agreement keeps confidential information...well... confidential.
Common Things to Look Out For
What’s considered “confidential information” under this agreement? If you can’t determine what confidential information is — if it’s too broad or vague — then what is the agreement protecting? On the flip side, is EVERYTHING under the sun "confidential"? Someone could try to invalidate that agreement because, of course, not all information is confidential.
What isn’t confidential? It can eliminate ambiguity to spell out information that isn't considered confidential.
What’s permitted in terms of disclosing information? A lot of Confidentiality Agreements will allow for disclosure if "required by law." Still, this usually comes with some requirements to give the other party notice before you disclose.
What about contractors? Can you disclose to contractors so long as they’re working on a project that necessitates the use of confidential information? Does the contractor have to sign the NDA too?
2. Independent Contractor Agreement
Purpose
Just as entrepreneurs are popping up everywhere, freelancers are offering services to businesses that might ordinarily go to an employee. An independent contractor could, for example, offer virtual assistant services to various businesses. Every entrepreneur using an independent contractor should know about an Independent Contractor Agreement. This agreement governs the relationship between a business and its contractors.
Common Things to Look Out For
Definition of the “Services.” What exactly is the contractor doing? What are the terms surrounding those services?
Deadlines. Are there any deadlines for the project(s) the contractor will be working on? What's the process for communicating deadlines to the contractor?
Intellectual Property. A biggie! Remember that big copyright lie we discussed? It's a common misconception that, by paying someone to create content for you, you own that content. So, do you need work-for-hire or IP assignment language in your agreement? Who will own the IP surrounding anything the contractor creates?
Passwords and Other Sensitive Information. Many companies will place some hefty responsibilities on contractors and employees alike when it comes to passwords and key-codes for social media accounts, software access, building access, and the like.
3. Professional Services Agreement
Purpose
This type of contract is for a business that has clients (in a “service-based” industry). It governs the company-client relationship.
Common Things to Look Out For
This contract is similar to an Independent Contractor Agreement in some ways.
Definition of the "Services." Again, what services will you provide? Eliminate any ambiguity of what services the business is performing and any deadlines or mile-markers.
Exceeding the Scope (aka, the "overly-demanding client"). What happens when the “scope” of those services changes mid-performance? Maybe someone requests an unforeseen change or the client wants more than what you agreed to.
Client Materials. Is the client providing anything (photos, logos) that you’ll need to complete the services? What happens if the client doesn’t do what it needs to do or provide what it needs to provide? Is client required to represent or promise that they have the rights to the materials they’re providing?
4. Website Policies:
Terms and Conditions (Terms of Use), Privacy Policy, IP Policy
Purpose
Terms and Conditions govern the relationship between the platform provider and the user. A Privacy Policy shows how the provider handles personal information. (There was a LOT of hype around privacy policies back in May, because of the GDPR.) An IP Policy is sometimes just a "copyright policy." It's often used if users are uploading content to the platform. A DMCA-compliant policy (and following the necessary formalities) may limit liability for infringing activity.
Common Things to Look Out For
Prohibited Activity. Are users prohibited from doing certain things? Engaging in bullying or hate speech. Impersonating someone else. Not doing these things might seem like common sense. But, the Terms of Use should spell it out if the platform owner wants to prohibit these things.
Terminated. Do you want the power to suspend or revoke access? Or the power to flat-out terminate a user? Consider listing the grounds on which you can terminate in your Terms of Use.
GDPR. Is your Privacy Policy GDPR-compliant? Does it need to be?
Formalities. Are all of the legally-required pieces in place for your IP/Copyright Policy?
The Point: The one constant when it comes to being an entrepreneur? We're always learning. Now, you have an idea of four contracts that every entrepreneur should know about.
What’s next? Click here to download your [free] Essential Legal Checklist from Spear IP.
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