Contract Essentials for Startups
Updated: May 24
By Shermian Koh on May 16, 2023.
Agreements govern all business relationships, whether with clients, employees, suppliers, manufacturers or employees. A company also requires different types of agreements depending on the stage of development it is in. For example, when there is growth in the business and an increase in demand for goods and/or services, companies are likely to bring on new vendors or subcontractors to cope with the demand. These new partnerships will require new subcontracting or teaming agreements.
If your business is offering a software as a service (“SaaS”), the service agreement must address key issues, including:
Scope of services
Service Level Agreement (For example: what is the response time, what is the system availability?)
If your business is offering goods or equipment, the type of agreements required would depend on whether you are a manufacturer, supplier or distributor.
If you are a manufacturer or supplier of goods, the supply agreement with the customer
must address key issues, including:
Warranties and product liabilities
Defects, returns, exchange and/or refund policy
If you are a distributor of goods, the distributor agreement with the supplier must
address key issues, including:
License to distribute (For example: what is the scope of the license and is this an exclusive or non-exclusive distributorship?)
Terms of commission
Scope of advertising and marketing requirements
Delivery, inventory and product inspection requirement
The truth about using online agreement templates
In addition to the risk of not having all the above-mentioned key issues addressed in a
customized agreement, the other big risk in using boilerplate templates available online,
is the failure to include limitation of liability provisions to limit a party’s exposure in a
dispute, for example, by capping the amount of damages for which a party may be liable
to pay (liquidated damages, indemnities, etc). As the enforceability of limitation of
liability provisions is frequently litigated, companies are advised to consult lawyers to
ensure that the limitation of liability provisions are enforceable based on the applicable
jurisdiction’s law. Consulting a lawyer to review your contracts can help to address any
issues before they actualize into problems that will be costly for your business.
This article contains information on legal issues and is not a substitute for legal advice from a
qualified attorney licensed in the appropriate jurisdiction.