Aneta Janiak-Olejnik

Types of Agreement and Contract

When it comes to formalizing a business relationship, agreement and contract are two commonly used terms. Although often used interchangeably, there are differences between these two terms. In this article, we will explore the types of agreement and contract that businesses use to establish legal relationships.


An agreement is a general term used to describe a legal relationship between two or more parties. Agreements can be verbal or written, and they can be formal or informal.

When a business relationship is less formal, such as between friends or acquaintances, a verbal agreement may suffice. However, if the agreement is for a significant business transaction or partnership, a written agreement is usually necessary to ensure that all parties are on the same page.

Types of Agreements

1. Memorandum of Understanding (MOU): An MOU is a non-binding agreement that outlines the terms and details of a proposed business relationship. MOUs are often used as a starting point for negotiations between two parties, and they can help identify potential issues before entering into a binding legal contract.

2. Letter of Intent (LOI): An LOI is a document written by one party to another expressing an intent to do business together. It outlines the terms and conditions of the proposed business relationship and is often used as a precursor to a formal contract.

3. Non-Disclosure Agreement (NDA): An NDA is a legal document that outlines the terms of confidentiality between two parties. It is commonly used when one party shares sensitive information with the other party, and it is essential to maintain confidentiality to protect trade secrets or other proprietary information.


A contract is a legally binding agreement between two or more parties that typically includes terms and conditions, obligations, and penalties for non-compliance. A contract can be verbal or written; however, a written contract is recommended for significant transactions to ensure clarity and avoid misunderstandings.

Types of Contracts

1. Sales Contract: A Sales Contract outlines the terms and conditions of a sale between a seller and a buyer. This includes the agreed-upon price, delivery date, payment schedule, and other important details.

2. Employment Contract: An Employment Contract outlines the terms and conditions of an employment relationship between an employer and an employee. This includes compensation, benefits, job responsibilities, and termination clauses.

3. Non-Compete Agreement: A Non-Compete Agreement is a legal document that prohibits an employee from competing with their employer after they leave the company. It typically includes terms such as the geographic area, duration, and industry restrictions.


In conclusion, agreements and contracts are essential in formalizing business relationships. By understanding the different types of agreements and contracts available, businesses can create legal relationships that meet their specific needs. Whether it`s a Memorandum of Understanding or a Sales Contract, it`s crucial to ensure that all parties understand and agree to the terms before finalizing any legal agreements.