Business contracts can serve many important purposes. They can lock in service provider pricing or vendor delivery dates. They can set standards for job performance or construction projects. Contracts clarify the compensation that employees can expect and the obligations business partners have to one another.
Every contract can be as unique as the agreement that it clarifies. Although many people signing contracts use fill-in-the-blank standard documents, creating custom contracts on demand or at least creating unique templates for specific business purposes is often worth the investment.
If business leaders include the right terms in their business contracts, written agreements can also help protect a company’s competitive advantages. The right contract inclusions can limit the risk of unfair competition and the dissemination of trade secrets that give a company an advantage over its competitors.
Many contracts can include restrictive covenants
A restrictive covenant is a clause or secondary agreement included in the contract. They effectively limit the future activities of the parties signing the contract. The party that makes concessions about future activities should receive something of valuable consideration in exchange, such as a job offer. They must then uphold their promise to avoid certain activities that could damage the company even after their working relationship ends.
A non-compete agreement, for example, could prevent an employee or business partner from starting a competing business after leaving their position. A non-compete agreement could also prevent an employee from taking a job with a direct competitor.
Non-disclosure agreements help protect trade secrets. If a former executive, vendor, service provider, or employee shares trade secrets online or with a competitor, they could face consequences for violating the contract. Finally, non-solicitation agreements prevent attempts to lure away employees or customers.
The right contract inclusions make all the difference
Appropriate contract terms protect businesses from actions that could undermine the organization’s competitive advantages. Business leaders may want to consider adding restrictive covenants to employment contracts, partnership agreements, and even the contracts negotiated with vendors and service providers.
Restrictive covenants can help protect the trade secrets that give the company a competitive edge. Reviewing existing contracts and identifying gaps in protection with a skilled legal team may make it easier for business leaders to prevent unfair competition.