5 Key Contracts You Need For Your Startup

4

mins read

January 18, 2023

Olivia O’Rourke
Lawyer
@
LegalVision
IN THIS ARTICLE

If you are starting a business, it is important to ensure you meet your legal obligations from the very beginning. Not only will your startup be legally compliant, but it will also reduce the risk of major legal hurdles down the track. 

This article outlines the key legal documents your startup will need from the time you launch. Whilst every business is unique, and yours may require additional documents, these foundational documents will be crucial for your startup through growth and acquisition, should you sell your business. 

Terms and Conditions (T&Cs)

For most startups, one or multiple sets of terms and conditions should be drafted. Whilst the circumstances will inevitably vary from business to business, three key documents may be relevant for your business.

Client Agreement 

Like many startups, your business may sell goods or services. If so, creating a robust client agreement early is crucial. A client agreement sets out what you will provide to a client and the terms of this arrangement. This document must contain: 

  • information on your obligations and rights; 
  • your clients’ obligations and rights; and
  • provisions to limit your liability. 

For example, you may include provisions outlining the scope of your services, payment terms, a dispute resolution clause, and how both parties can terminate the agreement. You may also include your intellectual property if that is developed under the agreement and is owned by you.

Sale of Goods Agreement

If your startup sells products, a solid set of terms and conditions will help you to comply with local consumer laws. Whilst this document closely resembles a client agreement, you will also include information such as delivery, repair, refunds, and exchanges. 

Depending on the nature of your startup, you may also choose to have provisions outlining your processes for:

  • products and orders;
  • delivery and delivery terms;
  • payment; and 
  • cancellation of an order. 

Marketplace Terms and Conditions

Perhaps your startup is a platform that enables buying and selling information, products, and services. In this case, you will need a comprehensive set of terms and conditions (T&Cs) which apply to both buyers and sellers. T&Cs identify the rights, obligations and responsibilities of all parties interacting with your marketplace platform.

If your startup is a marketplace, you should consider provisions regarding: 

  • your role in the interactions between the different types of users of the marketplace platform;
  • account registration and cancellation;
  • payment;
  • dispute resolution; and
  • intellectual property.

You should also include reasonable disclaimers, clauses that limit your liability, and any appropriate indemnity clauses.

Shareholders Agreement

Many startup founders decide to set up a company with one or more partners. In these circumstances, a shareholders agreement will act as a business-style prenup. This means it will set out each party’s role in the business, including:

  • duties and obligations;
  • how dividends will be distributed; 
  • how your business will issue or sell shares;
  • how decisions will be made in the company;
  • how to resolve any disputes that may arise; and
  • managing events of default.

It is important to create this document early, as this will ensure all shareholders know their position in the business from the beginning. 

Website Terms of Use 

In the modern age, it is almost inevitable that a startup will have a related website. If your startup has an online presence, terms of use for your website will enable you to contract with your users regarding online behaviour. This is especially important if website users will be interacting with your website by uploading content, posting reviews, and downloading content or products. 

In order to enforce these terms, the visitors must have reasonable notice of, and access to, the terms and then be able to accept them. Two common ways of ensuring this acceptance are to use a browse wrap agreement or a clickwrap agreement. 

Browse Wrap Agreement: 

By accessing or browsing your website, a visitor agrees to the terms of use. It is up to the user to review the terms, and to stop using the website if they do not agree. 

Clickwrap agreement:

The visitor must click on an “I Agree” box to indicate acceptance of the terms of your website before proceeding. 

Privacy Policy 

Data breaches are not only in many cases illegal under privacy law, but can be detrimental to the reputation of your startup. Indeed, if your business needs to comply with local privacy laws, you are legally required to have a privacy policy. Even so, having a privacy policy is best practice. 

The types of information your privacy policy should address include:

  • what personal information you collect, which may include sensitive information;
  • how you collect, use and disclose this information; and
  • how you store the information including deletion of information if necessary.

Furthermore, you should protect your client’s interests and set out a client’s right to:

  • contact you;
  • access or correct any personal information held by you;
  • unsubscribe; and
  • complain.

Employment or Contractor Agreements 

When you begin to employ contractors or onboard new employees, you should be prepared with employment and contractor agreements. 

These documents are relatively standard, and should include: 

  • the role of the worker; 
  • payment and benefits; 
  • leave entitlements; and 
  • employee expectations. 

Note that there is a distinction between contractors and employees that has legal and financial implications. So, these documents must align with local legislation, and legal advice is recommended to ensure they are legally valid and fair. 

Key Takeaways 

The documents your startup will need when starting out will ultimately depend on the type of business you are launching, as well as the products or services you are offering. However, it is a good idea to set yourself up for success by ensuring your business is legally healthy from the beginning. 

The key documents you need include: 

  • business terms and conditions;
  • a shareholders agreement;
  • website terms of use;
  • employment or contractor agreements; and 
  • a privacy policy. 

As every startup is unique and has different legal requirements, consider speaking with a lawyer to ensure you are legally protected.

Lawyer
@
LegalVision

Olivia O’Rourke is a Lawyer at LegalVision. LegalVision is a full-service commercial law firm that works with startups and VCs in Australia, NZ and the UK. The firm's membership offers unlimited, on-demand access to a team of specialist startup lawyers.

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