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Running a Business: 5 Common Types of Contracts in Malaysia

When running a business, it is common to receive various types of contracts in Malaysia from vendors or partners to be reviewed, negotiated and signed. You also manage agreements with your employees or clients as a business owner.

Contracts are structured and operated differently in some industries. Depending on the type of goods and services, some arrangements can be simple, and some can be complicated.

Here is a summary of some of the must-have business contracts for a growing business:

Types of Contracts in Malaysia:

1. Tenancy Agreement

A Tenancy Agreement is one of the types of contracts commonly entered by businesses. The Tenancy Agreement is the landlord’s “standard” agreement and usually favours the landlord. Also, keep in mind that renting a space is a significant commitment.

Consider other essential aspects such as if the use of the area is broad enough to cover the nature of your business, are you allowed to sub-let or assign the tenancy, is there a right to extend the duration of the tenancy, and is the Tenancy Agreement clearly spells out the landlord’s obligations.

2. Employment Agreement

If you are hiring employees, an Employment Agreement covers points such as how much their salary and the benefits they will get from the business, the workings hours per week, reasons when an employee can be terminated, and how employees can quit their employment.

The Employment Agreement will also include a provision that all work products developed by the employee belong to the business and to keep the company’s proprietary information accessible by the employee confidential.

3. Non-Disclosure Agreement (NDA)

You may want to share information with interested parties if you plan to strategically work together or have a third party invest in your business. As such, you need types of contracts that can safeguard vital information.

For instance, a Non-Disclosure Agreement protects your confidential information and gives you the right to pursue legal action if the other party discloses the confidential information covered under the agreement. You can use a Non-Disclosure Agreement with your employees, vendors, partners or clients.

4. Sales Contracts

If your business sells products (goods or equipment), you must have a Sales Contract. The contract states the price, quantity, terms and conditions of the sale of products.

The terms and conditions include, amongst others, the products you are selling, the price, payment and credit terms, the tax, the disclaimers of warranties and the limitation of liability.

5. Service Contracts

If you provide professional services, you will need to prepare a Service Contract (sometimes it is referred to as consulting agreement, agreement for professional services).

Service Contracts include, amongst others, the scope of services, the fees for the services and the duration of the services. If the scope of services is enlarged, a different amount of fees will be payable and other terms and conditions of the services.

Conclusion

In all types of business dealings, there are different types of contracts to be drafted. The general rule is that if your business dealings are not in writing, it’s usually hard to enforce them legally.

If you are given contracts, do not sign the contracts until you know and understand what you are committing to the other party. Make sure to have a lawyer draft and review any agreements to avoid legal headaches.