Like every typical Nigerian daughter, I studied law due to my encouraging, slash, borderline pushy parents. I managed to pass my degree, and ended up practising Immigration Law at EY. However, 10 years later I don’t remember a single thing from my commercial law classes, which unfortunately on this journey has bitten me in the butt a few times.
As a founder, the beauty of launching a businesses is in the building - getting stuck into product development and speaking to users, but as you transition into a CEO it is crucial you begin to build the infrastructure around your business - this includes getting your contracts and agreements in order.
If you’ve ever seen ‘The Social Network
’ aka The Facebook Story
(a must watch) you will know how important agreements are, particularly between between co-founders
. This is the case for any other contractual agreements between two parties. Below I’ve outlined what I’ve learnt when it comes to drafting and reviewing three types of contracts.
1) Employment and Consultant Contracts
When issuing employment and consultant contracts, it’s important to include confidentiality, non-solicitation and non-compete clauses. These clauses protect your company from certain actions of your employees or consultants whilst they are working with you, (and in some cases this enforceable for 12 months or more, from the end date of their contract).
Confidentiality clause: protects your company’s IP and prevents employees or consultants from sharing sensitive information with third parties.
Non-Solicitation clause: prevents employees or consultants from directly or indirectly soliciting (stealing) your company current client, suppliers, or employees.
Non-Compete clause: prevents employees or consultants from engaging, operating, or working with any other company that is considered to be a competitor of yours for an agreed period of time.
2) Client Service Agreements
A Service Agreement is an agreement between two businesses where one agrees to provide a specified service for the other. If you’re running a B2B company, this is a common agreement. For example company A agrees to design company B website. Receiving a Service Agreement is always exciting, as it means you’ve won the work and your company is about to get paiidddddid 💰
However, it’s important to run through Service Agreements with a fine tooth comb, as often they are in favour of the client, not the supplier. My Legal Consultant once told me “it’s not what is in the contract, but what is not in the contract you should be paying attention to” When you receive a Service Agreement ensure you review the following:
Remedies provisions: sometimes bad things happen, and you can never predict these things, but if something does go wrong you need to determine the remedies if the client is at fault. E.g putting in cancellation or late payment fees, and also limit your liabilities if you’re the one at fault.
Causes for termination: include ways to terminate the contract for cause or without cause if it is not working to your benefit. No-one wants to be stuck in a relationship that is not serving them (consider this a prenup💔).
Rights and responsibilities: it’s important to detail who’s responsible for what and who is liable if something doesn’t happen according to the contract. Never rely on verbal understanding, and seek Legal Counsel, for clarity.
3) Partners Memorandum of Understanding (MoU)
MoU’s are useful if you are in the process of drafting a formal contract, but still need to carry out services before then. They can be used to agree prospective terms of a partnership, establish the ground rules and explore a working relationship. I’ve often used them in co-bidding opportunities with Community Partners, or for non-commercial opportunities.
P.S, I’m not a Legal Advisor, and it’s only by seeking professional Legal Counsel that I’ve been able to come to grips with complex agreements. If you’re just starting out, I suggest signing up to SeedLegals
for simple contract templates. I hope you found the above useful, let me know how you get on by using the hashtag#FSuite.