Whether you’re looking to strike a deal with a new partner, negotiate fees with a client, hire your latest employee, or delegate the revamping of your website to a web design agency, sooner or later you’ll need to sign an agreement, most often in the form of a contract.
“Wait, there’s a difference between agreements and contracts?”, we hear you ask.
An agreement is a general term used to describe an understanding between two or more parties, while a contract is a legally binding agreement.
In other words, all contracts are a form of agreement, but not all agreements are contracts.
In this article, we’ll explain what an agreement is, talk about the key elements every agreement should have, present a few examples, and provide templates to help you protect the interests of your company without spending hours writing each one from scratch.
What is an agreement?
In the business world, an agreement is a clear and concise framework that defines the terms and conditions of a deal between two or more parties, such as:
- The scope of work (the product or service to be delivered)
- The timeline and mode of delivery
- The obligations of each party, including payment terms
- The termination conditions
Agreements are necessary to guarantee that all parties have a clear understanding of their obligations and responsibilities — and can actually fulfill them.
In order to scale, businesses need to standardize their contract and agreement processes and make sure each agreement they sign is airtight and legally binding.
The best way to do this is to use a dedicated contract management system such as PandaDoc, which enables you to:
- Decrease the time and money spent on paperwork by reducing the hours needed to draft an agreement to mere minutes
- Provide the best experience for all recipients by sending a branded agreement that they can sign on any device
- Maintain consistency in all documents across the organization by enabling you to create your own templates, use your branding, and have all your standard policies spelled out in everything you sign
- Ensure all your documents are legally binding by providing you with ready-to-use templates that use the best practices of contract management and an integrated e-signature solution
Contract vs agreement: What’s the difference?
Ok, so what’s the difference between a contract and an agreement?
The terms “contract” and “agreement” are often used to refer to the same thing: a legal document outlining the terms of a deal. However, there are important distinctions between the two:
- An agreement is a broader term that refers to a general understanding between two or more parties that they’ll do (or not do) something.
- A contract, on the other hand, is a legally binding agreement that creates an obligation to do something.
Contracts are more formal and need to respect certain, often very exact, conditions in order to be valid.
Agreements can be less specific; for example, you might outline an agreement in an email or even during a phone call. Often, agreements precede contracts in the negotiation process.
However, to make sure your company’s interests are well protected, you need to actually sign contractual agreements with your partners, clients, and employees — and not just “agree” on the terms of a deal.
If you’d like to learn more, head over to our article about all the differences between contracts and agreements.
The key elements of a successful agreement: What should a business agreement contain?
Contractual agreements need to contain a number of things to be valid:
- Offer: A specific and unambiguous offer is the backbone of any contract.
- Acceptance: The other party must accept the offer.
- Consideration: Both parties must exchange something of value (typically, a product or service is exchanged for money).
- Capacity: Both parties must have the legal capacity to sign an agreement.
- Intent: Both parties must have the intention to enter into an agreement.
- Legality: The contractual obligations must be legal.
The best way to make sure your contracts have all the elements that are necessary for their validity is to use an agreement template, of which we have dozens (free and ready to use!).
In addition to the six elements listed above, there are a few things that business agreements should contain to make them as unambiguous as possible:
- Signatories: Those signing and their legal details (such as name, address, business registration number) should be included in the contract.
- The scope of the agreement: You also need to include information on the exact nature of the agreement and its scope, i.e. describe exactly what the parties are agreeing on. For example, this can be to rent a property, to create a website, to not disclose information, etc.
- Obligations: Agreements should explicitly state the obligations of each party in terms of delivery, performance, and payments.
- Limitations and disclaimers: You might need to limit the agreement’s scope explicitly or add a disclaimer regarding each side’s responsibilities.
- Governing law: You also need to mention under which jurisdiction the agreement shall be governed.
- Termination conditions: When does the contract expire? What can either party do to terminate it? Details on termination terms make this clear.
- Signatures and date: And last, both sides should sign the contract and add the date on which it was signed.
Top 10 examples of agreements (plus templates)
In this section, you can find the 10 most common examples of agreement, along with PandaDoc’s templates for each to make your life easier.
Having the right agreement template at hand helps you accelerate the negotiation process and spend less time and effort on paperwork.
Plus, it protects your organization’s interests — a win-win!
Each one of our templates also features specific tips and guidelines on how to fill it out and make it legally airtight.
1. Non-disclosure agreement
A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a legally binding agreement that protects sensitive information from being shared with anyone outside of the agreement.
Typically, businesses use NDAs to protect trade secrets and proprietary information from being leaked to competitors. NDAs might be used in a number of business relationships, such as:
- During employment (⅓ of the US workforce is bound by an NDA)
- During negotiations with partners or investors
- In business partnerships and collaborations
- Between vendors and suppliers
An NDA is a fairly straightforward way to establish the ways in which confidential information is protected and enforced, and also outlines the duration of the agreement and the avenues available in which disputes can be resolved.
Non-compete agreements are often used in combination with NDAs.
They are used to prevent employees from entering into direct competition with their employer for the duration of the employment and sometimes for a specific period after that term concludes.
You can either write an NDA yourself or use one of our state-specific NDAs for the US or our general NDA template below:
2. Joint venture agreement
A joint venture agreement is a contract between two or more parties who decide to work together on a business project (a venture).
In this way, companies join forces (i.e. blending their expertise and resources) to pursue a common goal.
It’s one of the many types of strategic partnership agreements that define the specific conditions of a business partnership.
The joint venture is usually a separate legal entity (such as a corporation) and might be:
- A 50/50 joint venture, in which each partner has an equal part of the child company, or
- A majority venture, where one side owns 51% or more of the venture
The agreement itself outlines the commitments, contributions, and benefits of each party and also defines the ways in which they’ll share profits and expenses.
Our joint venture agreement is among our top-rated agreement templates and completely free for you to use:
3. Warranty agreement
A warranty agreement is a contract between two parties that outlines the terms and conditions covering the warranty of a product or a service.
A warranty is a commitment from the seller that the product will function as described or that their service will produce the promised outcomes. Warranty agreements typically feature:
- A description of the product or service covered
- Duration and limitations
- Information on how to make a warranty claim
Warranty agreements are most commonly used for products (such as smartphones or computers) but they might also be used for services (courses, coaching, etc.).
They provide buyers with a certain level of security regarding the quality of the product.
PandaDoc has a warranty agreement template you can use straight away for free:
4. Fee agreement
Fee agreements define the financial arrangement between a service provider and a client.
Fee agreements are typically used by attorneys, consultants, recruiters, and other contractors, and lay out the scope of the work, the timelines, and the invoicing and payment terms.
Both sides agree on a payment schedule; for example:
- A one-time payment
- Multiple payments (e.g. those tied to specific milestones)
- Recurring payments over a certain period of time
You can tailor our fee agreement template to set your fees with clients:
5. Service level agreement
A service-level agreement (SLA) is a contractual agreement between a service provider and its customers, defining the level of service to be provided.
SLAs are important because they outline:
- The quality and availability of the service that the customer can expect
- Remedies in the case of the inability to meet the service level commitment
If your company sells access to an online platform for editing images, for example, your SLA might include details on the platform’s uptime and capacity to handle a certain number of images.
Below, you can find our service-level agreement template you can use with clients:
6. License agreement
A license agreement is a contract between two parties defining the ways in which one party can use the other party’s software, technology, patents, or other intellectual property.
The document outlines the terms of the agreement, such as:
- Scope and conditions of use
- Intellectual property rights
- License fees
- Restrictions and limitations
License agreements provide control over the use of intellectual property and the fees that the owner can claim.
They can also limit certain types of use; for example, a streaming service will likely ban any commercial use of its content.
We have comprehensive license agreement template you can use as needed to protect your intellectual property rights:
7. Website development agreement
A website development agreement is pretty self-explanatory: It’s a contract that defines the services that a website developer or a web development agency provides.
If you’re in the business of providing web development services, a strong website development agreement is essential to protecting your business.
A website development agreement serves as a framework outlining your responsibilities and commitments when working with clients, as well as the terms under which you’re providing your services (including payment terms), plus specific limitations.
PandaDoc has a ready-made website development agreement template you can download and use for free:
8. Sales commission agreement
If your company has sales reps who are working for a commission, a sales commission agreement is an essential element to add to your documents stack.
It outlines the specific sales commission structure you’ll be using to remunerate your salespeople; commissions are usually given on top of a base compensation and as a percentage of the sales.
Its purpose is to:
- Authorize sales personnel to sell your products or services in line with your specific policies
- Define the commission structure and performance objectives
You can use our top-rated sales commission agreement template to define the ways in which you’ll use commissions to compensate your sales reps:
9. Marketing agreement
A marketing agreement defines the specific marketing services a company will provide to a client to promote their products or services. It’s one of the most essential marketing documents that enable marketers (and marketing companies) to be successful.
It can be used by marketing agencies and freelancers alike and typically includes details about:
- The project’s scope and timeline (including marketing channels and materials)
- Fees and payment terms
- Performance commitments and limitations
- Termination conditions
If you’re working in a marketing agency or are an independent marketer, grab our marketing agreement template to streamline your contract management process:
10. Agency agreement
An agency agreement is a contract between two parties where one side, the agent, agrees to perform specific tasks or make certain decisions for the other party (commonly known as the principal).
Agency agreements typically relate to selling and promoting products on behalf of a company and are usually related to a specific market (such as a geographic territory).
They might be exclusive, where the company only works with one agent within this territory, or non-exclusive, where business is conducted with multiple agents across the same region.
The agreement will define the responsibilities and commitments of each side, the commission or fee schedule, and the scope of the agreement (products/services, territory, duration, and more).
If you need a ready-to-use agency agreement right away, we have just the template for you:
Create and manage agreements faster and more efficiently with PandaDoc
Contractual agreements are an essential part of doing business — and big and small businesses alike need to make sure their agreements are legally binding and protect their interests.
There are many more types of business agreements out there — and for most of them, we have the right template you can use to simplify your contract management process.
Plus, if you sign up for PandaDoc, you can store all your templates in one place, customize them with your company’s branding, collaborate on them (with as many people as needed), and get them signed quickly and easily.
Get a free 14-day trial to see for yourself how much simpler it can be to manage your organization’s agreements without spending hours on each document and exchanging countless emails with your partners and clients.