Writing business contracts

A contract of terms and conditions is an agreement between two parties that might be written down, verbally agreed, implied, or a mixture of all of them. Even if you do not issue a written contract at first, it is certainly a good idea to write one when dealing with suppliers, customers or employees, as it may prevent disagreements arising later on. In some instances, a written contract is required by law.

Putting it in writing

In terms of employment, you are under a legal duty to provide most employees with a 'written statement' of main employment particulars within two months of the start of their employment with you.

The written statement isn't necessarily the contract of employment itself, but can provide evidence of the terms and conditions of employment between you and the employee, if a dispute arises later on.

Bear in mind that there may be some implied terms and conditions in your original job adverts and letters, or in individual agreements or the staff handbook.

If you decide to issue a written contract after verbal agreements have been made, it is a good idea to include a term stating that it replaces all previous discussions and correspondence, in relation to terms of employment provided the employee accepts this.

Making a statement of employment

The statement of employment, or 'principal statement', can form the basis of a contract, and can be one or multiple pages. But it makes things clear for everyone, and is worth doing well.

Some of the things the principal statement should include are:

The legal name of your company, and the trading name, if it's different.
The legal name of the employee.
The date the current employment began.
Any earlier date upon which employment with a previous employer began, which is treated as 'continuous' with the current employment.
The employee's pay, or how it is calculated, and the intervals at which it will be paid (e.g. weekly or monthly).
The employee's hours of work.
Accurate details of entitlement to holidays and holiday pay.
The job title or a brief description of the work.
The address of the employee's place, or places, of work.

Making a statement for trading

When it comes to drawing up legal contracts with your suppliers or business customers if you're trading business-to-business, your contract should make all aspects of the trading process as clear as possible.

You need to cover what happens in the business process, when it will happen, and exactly what each party is responsible for at each stage.

Some things to cover are:

What goods are being bought, and any legal or technical rules with which they must comply.
How much you will pay for the goods or services.
The payment method and timeframe.
The delivery process and how the goods will be transported to you.
Insurance, and who bears what risks for loss or damage at each stage of the process.
Procedures that would be implemented if a dispute should arise.
Any service level agreements (SLAs) - see below for an explanation of this.

The small print

SLAs are a part of the supplier contract that define the level and quality of service to be delivered. They also set out responsibilities and priorities, and even how you're going to terminate the relationship. They often need updating.

SLAs can ensure that the supplier meets delivery demands, manufacturing targets, or business deadlines. But SLAs are complex documents and you would do well to get legal guidance to ensure they are thorough and accurate.

If you take out a business insurance policy with Direct Line for Business, you will have access to various business helplines including Free legal advice.

Related information:

Employers' liability cover - even if you've taken the correct precautions to make your workplace safe, an accident could happen, and you need insurance should an employer claim against you for negligence.

Public liability insurance - insurance should a member of the public claim against you for injury or damage to their property. This is included in most of our business insurance policies.

Free legal advice - legal advice can be costly. We've set up free 24-hour helplines that all our business insurance customers have access to.