This is why robust signed agreements are life savers to startups

So you hired the first employee, but dint give an offer letter yet. Well, you are calling in the trouble gods from day 1. Consider the following scenarios that are very easy to get triggered in normal course to businesses of all sizes.

Scenario 1: You hired a contractor for your office interior works. The contractor took a part payment as advance, started work, but over a period of time began to slowdown. After several follow-ups and further delays, the contractor was served with termination notice mentioning deficient amount which needed to be paid back. Contractor disagreed for reimbursing amount and in concurrence with legal input decided not to litigate and asked contractor to sign off final settlement letter.

Company faced couple of months delay and had to write off portion of advance paid. However company having signed off clear cut Letter of Intent (LOI), Purchase Order (PO), Interior Works Agreement & Termination Letter pushed the contractor to get into an amicable closure without further escalation and legal battle.  

Scenario 2: You hired your team lead after multiple background references, called his college professors for feedback and all boxes have been checked. You are comfortable that he gets the work done, though his disregard to your experienced partner been growing. One day, team lead makes a call for all of team to take a leave which would result in a closed office to customers without a prior discussion with partners. You finally take a call to let the team lead go as that was the last straw after a couple of missteps. Before he comes back after the leave, you give him a call and let him know of the decision. You then send an email to his personal id mentioning the last workday.

This all went smoothly as the team lead was in probationary period and the signed offer of appointment had detailed the tenure of probation and terms of termination in detail.

Scenario 3: Your sales personnel owing to his mistake met with an accident while driving company owned vehicle . However, the personnel tried to cover up his mistake and settled a pay out to other party in violation to company’s suggestion to file a case formally for insurance settlement. Company still contacted third party on its decision to file a case which they didn’t agree to. The issue escalated once the third party later contacted company for pay out as the sales personnel was not responding to their calls. Company reiterated that it was up to sales personnel to pay up now as both parties didn’t heed to its original request.

Finally, the sales personnel and third party settled the case. The sales personnel had a statement of work signed as a contractor for company which clearly mentioned liability in case of property destruction due to negligence of contactor.

Each of these scenarios would have crippled a startup or even consumed valuable resources of an established business. Presence of a sound signed contract when we onboard an employee, project-based consultant, short term contractor, long term service provider or a freelancer can make or break a business. Ensure that all of these contracts have a non-disclosure and non-compete addendum which safeguards your business secrets from being a free for all.

An agreement also should have clauses drafted by industry experts who could visualise possible breaking points and future black swan scenarios like a force majeure clause covering pandemic outbreaks. A default agreement template not specific to your business while on the other hand won’t offer you the intended protection.  

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