Contracts every BC small business should have in writing

Plenty of small businesses run for years on handshakes, quotes sent by text and terms copied from someone else's website. It works until a customer refuses to pay, a supplier stops delivering, or a contractor walks away with your client list.

This guide maps the core agreements a BC small business should have in writing, and the provincial rules that add terms to your sales or let consumers cancel when the paperwork falls short.

Why "we agreed on the phone" is not enough

Many business agreements in BC are binding even if they are never written down. The trouble starts when something goes wrong and each side remembers the deal differently. A written contract fixes the price, the scope, the deadlines and what happens if one side does not perform, and it gives you something concrete to point to before a disagreement becomes a lawsuit. If a dispute does arise, our article on breach of contract in BC explains what can be claimed.

The agreements below cover the relationships almost every small business has: customers, suppliers, contractors, people who see confidential information, and the premises.

Customer terms for goods and services

Your terms with customers are the contract you use most often, so small gaps repeat across every sale. A sound set of customer terms usually covers:

• Scope. What exactly you are supplying, and what is not included.
• Price and payment. Deposits, when invoices are due, and what happens if a payment is late.
• Changes. How extra work or changed orders are priced and approved.
• Delivery and acceptance. When the job or the goods are considered delivered and accepted.
• Limits on liability. What you are and are not responsible for if something goes wrong.

If you sell goods, BC's Sale of Goods Act adds terms whether or not your contract mentions them. Section 18 implies conditions that goods bought by description from a seller who deals in them are of merchantable quality, that goods are reasonably fit for a purpose the buyer made known and relied on, and that goods will be durable for a reasonable period given their normal use. Between businesses, section 69 allows those implied terms to be varied or excluded by express agreement. In a retail sale of new goods to a consumer, however, section 20 makes a term that tries to take away the section 17, 18 and 19 conditions void. A warranty disclaimer copied from another business's website may simply not work.

Clear payment terms also make collection easier. Our guide to unpaid invoices for BC small businesses shows how much depends on what the customer agreed to in writing.

Extra rules when you sell to consumers

If your customers are individuals buying for personal use, the Business Practices and Consumer Protection Act applies in addition to your own terms. Part 4 of the Act sets requirements for several common contract types, including:

• Distance sales contracts. Contracts not made in person, such as online or phone orders where the customer cannot inspect the goods first.
• Direct sales contracts. Contracts made in person somewhere other than your permanent place of business.
• Future performance contracts. Contracts where supply or full payment happens after the contract is made, such as a deposit for later work.

For these contracts, section 18.2 lists what the contract itself must include: your business name, a detailed description of what is supplied, an itemized price, other costs such as taxes and shipping, payment terms, delivery arrangements, your return, exchange, cancellation and refund policies, and any renewal terms. Section 18.3 requires disclosure of that information before the contract is made when the total price is above a prescribed amount, together with an express opportunity to view the entire contract.

The consequence of getting it wrong is significant. Under section 18.4, a consumer can cancel if required information is missing, inconsistent with what was disclosed, or not disclosed as required: within 7 days after receiving a copy of a distance sales contract, and within one year for a direct sales or future performance contract. Checking your online checkout and quote forms against these sections is a worthwhile exercise.

Supplier and independent contractor agreements

A supplier agreement should cover price changes, delivery times, quality standards, what happens if supply stops, and who bears the risk of goods in transit. If a supplier is critical to your business, the termination and notice terms deserve particular attention.

When you bring in an independent contractor, a written agreement should set out the services, fees, who supplies tools and equipment, who owns the work product, and confidentiality. Be careful with the label. The Employment Standards Act defines "employee" broadly, including a person an employer allows to perform work normally performed by an employee, and its minimum requirements cannot be waived by agreement (section 4). Calling someone a contractor in a document does not settle the question if the working relationship looks like employment.

Confidentiality and ownership of ideas

Customer lists, pricing, recipes, software and processes are often worth more than a small business's equipment. A confidentiality agreement (sometimes called a non-disclosure agreement) should be signed before you share that information with a potential partner, investor, buyer, supplier or contractor, not after. A good one defines what is confidential, limits how the information can be used, and says what must be returned or destroyed when the relationship ends.

Ownership of work created for you should also be dealt with in writing, particularly for logos, websites, photographs and software made by people who are not your employees.

Your lease and your co-owners

Two more documents shape the business more than most owners expect. A commercial lease commits you to rent, repairs and restrictions for years; read our article on commercial lease clauses to understand before you sign. If you own a company with others, a shareholders' agreement sets out how decisions are made and what happens if someone wants to leave.

A yearly contract check-up

Contracts age. Prices change, you add services, you start selling online, or a supplier relationship becomes critical. Set a date once a year to pull out your standard terms, your main supplier and contractor agreements and your lease, and ask whether they still match how the business actually operates.

Want your standard contracts reviewed before the next dispute?

Our business lawyers can review your customer terms, supplier and contractor agreements and confidentiality agreements, and prepare documents that fit how your business works.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.