In our last post we talked about the various different kinds of legal agreements you may come across when you’re in business. It’s important that every business owner properly understands the legal contracts they’re entering into, which is why we cover general law in our Small Business Management course. There are a few common clauses within in most legal contracts that appear often, so we thought we’d explain them here.

Terms of Agreement: These are the conditions under which both parties agree to abide. The terms of agreement are different to the terms of a contract, which relates to the period of time the contract may be in effect for. The terms of agreement can include:

Transfer of Rights: Relates to the assignment of rights under a contract. This allows for the complete transfer of rights from the assignor to another assignee. For example, if Party A contracts with Party B to sell Party A’s car to Party B for $100, Party A can later assign the benefits of the contract – i.e. the right to be paid $100 – to another party, Party C.

Confidentiality: A confidentiality clause is a standard written agreement that’s used when two parties are working together and one or both parties have access to sensitive information. This is common practice in the high-stakes, ultra competitive technology industry, but it’s become increasingly common place in businesses that employ contractors to perform services that are intellectual in nature.

Intellectual Property: An intellectual property (IP) clause in an agreement that assigns the right of intellectual property to one party. IP clauses have become more commonplace in standard workplace agreements, where an employee agrees that their intellectual property is the property of their employer – and this is usually the case with contractors, too. However, there are some exceptions; authors, for example, retain their intellectual property rights in exchange for the publisher’s right to own the copyright to their work. In other words, the idea remains the writer’s but the work that results from that idea belongs to the publisher. This principal may also apply to software developers, and the like.

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These are pretty standard clauses you can expect to encounter in most legal contracts, though they can vary and it’s recommended that you have a lawyer draft up your contracts for you. Alternatively, you can nut out a contract and its terms yourself, and then ask a lawyer to look over it for you. General law as it pertains to small business is covered in our Small Business Management Course.