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If you are a small business owner in New Zealand, you will be dealing with different types of contracts that you may not understand. In most cases, you will need to get a lawyer to go through them to make sure that the terms are to your liking. However, there are a few key contracts for small businesses that you should thoroughly understand so that you can negotiate without the need to ring up your lawyer. These are:

  • employment contracts;
  • service agreements;
  • lease agreements; and
  • contractor agreements.

The above contracts are not the only contracts you may deal with. However, they are the ones that you will see most often. This article will discuss each of these contracts and what to look out for when negotiating the terms.

Employment Contract

The most common contract that you will be dealing with is the employment contract. This contract outlines the legal relationship that your employees will have with the business and the terms in which they will work for you. Most employment contracts are stock standard. However, you should know a few things before sending one out. 

There are two key types of employment contracts. These are:

  • collective employment contracts; and
  • individual employment contracts.

Collective Employment Contract 

As the name suggests, a collective employment contract is negotiated by unions on behalf of employees. Most small businesses will never come across collective employment contracts. However, you must still be aware of them. If you employ an employee under a collective employment contract, they can also negotiate individual terms. 

Note that employers also cannot unduly influence employees to join or not join a union. 

Individual Employment Contract

An individual employment contract is only negotiated between the employer and employee. There are minimum terms that you, as an employer, must contain in the contract. So, ensure that you are aware of these. For owners of small businesses, individual employment contracts will be the most common form of employment contracts you will face.

Service Agreement

A service agreement is a contract that you will form between yourself and your clients. Depending on the type of business you are in, your service agreement may be your most important contract. This is as it outlines the terms and conditions in which your customer will receive your good or service. For example, a transport company will have a service agreement with their clients to outline how they want their goods transported, and the terms attached to this. Your service agreement can be very broad or specific, depending on the type of good or service you provide. 

Ensure that your service agreement does not contain any unfair terms, as this could make you liable under relevant laws and may void your contract. 

Lease Agreement

As a small business, you will likely have a lease agreement. This is the agreement that you have with your landlord to lease a specific space. Most standard contracts will benefit the landlord, so you should negotiate the lease. The essential things you should look out for are the:

  • length of the lease;
  • rights to assign or to sublet the lease;
  • landlord’s obligations; and
  • payment frequency.

Some long term lease agreements will also have periodic rent increases embedded in the contract, so ensure that you study your agreement carefully before signing.

Contractor Agreement

A contractor agreement is a contract that outlines your relationship with anyone who is doing work for you under contract. There will be times in which you contract people to do tasks instead of hiring full-time employees. This may be due to the length or difficulty of the task. When drawing up a contractor agreement, it is important to include specific provisions such as:

  • contractor’s liability; and
  • intellectual property.

Some contractor agreements would not include any liability on the contractor’s part if something was to go wrong. It is important to add this in so that your contractor takes full responsibility for any loss incurred through their fault. You must also protect your intellectual property when hiring a contractor. If your contractor creates any intellectual property, then this may not be owned by you if your agreement does not stipulate this. This will be more important for business in industries such as software development.

Key Takeaways

A small business is built on the relationships it has with its stakeholders. Contracts for small businesses usually underpin these relationships to protect the rights and responsibilities of each party. As a business owner, you must understand how these contracts work and what terms you should specifically put in them so that if a dispute were to arise, you would be protected. The main takeaway point is that any contract you sign benefits the business’s fundamental interests. If you feel unsure about the terms of a contract, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I use contract templates?

Yes, it is ok to use contract templates; however, you must make sure that you add or take away any terms that will not serve the business’s interests.

Can my employees form a union to bargain their contract?

Yes, they are allowed to do this. However, as a business owner, you cannot dissuade or encourage them from doing this.  

Can I usually assign my lease agreement?

This depends on the terms of your contract. If it does not expressly disallow an assignment, you will be allowed to assign your lease.

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