It’s important to comprehend the particular business regulations in the Philippines before launching a startup. The principal agency for registering businesses is the Securities and Exchange Commission (SEC). However, solo entrepreneurs are required to do so with the DTI or Department of Trade and Industry. In light of this, we have put together a guide detailing the many commercial contracts that a Philippine business may work on.
Once you’ve registered with the DTI or SEC, the Bureau of Internal Revenue is the next place you should visit. Let’s face it: tax regulations in the Philippines are complicated. Value-added and income taxes are just two of the taxes you’ll have to deal with. Let’s run through the commercial contracts you’ll need to be familiar with.
What are Business Law Obligations in the Philippines?
A contract under the laws of business is a legally binding agreement that outlines the statutory duties of all participants in a business arrangement. When people sign a business contract, they are legally obligated to fulfill the conditions of the bargain. A party may take actions in court against the other under business relationships and various other agreements if the other party violates the terms of the transaction.
A Contract in Business Law Obligations
According to the Civil Code of the Philippines, a contract is a convergence of capacities among the parties whereupon one commits himself, with regard to another, in order to provide a component or to conduct numerous services.
Identifying the difference between Implied and Express Contracts
Implied Contract
The conditions and boundaries of this agreement are implied by the conduct of the individuals or participating groups.
Express Contract
This is a reference to an oral or written agreement with explicit conditions and limitations. An express contract can’t be replicated in an interpreted form after it has been officially signed and acknowledged.
Defining a Legally Binding Contract in Business Law Obligations
Any legally executable accord is referred to as a “binding contract.” This implies that the opposing party may file a lawsuit against you if you sign a document that is legally enforceable and fails to uphold the terms of the agreement.
Common Types of Legally Binding Contracts for Startups
Unilateral Contract
This kind of agreement is utilized when a single party guarantees payment to the other party whereby the latter has completed the necessary task or motion. An inquiry is typically made publicly so that anyone can reply, meet the conditions, and ultimately be compensated.
Bilateral Contract
This an arrangement wherein both parties commit to carrying out their respective obligations. While this isn’t frequently the circumstance, bilateral agreements often entail equal obligations or remuneration from the person making the offer and the person receiving the offer. Oftentimes, this is also referred to as a side deal” in more complicated circumstances, such as international trade negotiations.
Fixed Price Contracts
Occasionally referred to as lump-sum contracts, these are arrangements wherein the parties specify the products or services that one will supply and the amount that the other will have to pay.
Fixed-price contracts work well when the scope of the undertaking can be decided upon in advance, and the prices of the supplies and labor required to complete the work can be reasonably approximated. In the event that additional supplies or time are needed than first anticipated, the sum paid to the supplier may not change.
Top Contracts for Startups in the Philippines
Founders Agreement
A Founders’ Agreement is a written agreement that regulates the business connections between the initial founders of a company. Every founder’s commitments, liabilities, and liberties are outlined in the Collaboration. In general, it governs issues that the business’s operating agreement might not address.
Memorandum of Agreement (MOA)
A Memorandum of Agreement (MOA) is a formal agreement among parties to collaborate on an undertaking or achieve a goal. A memorandum of agreement serves as a legally binding written confirmation of the terms of the contract reached by each of the parties.
Articles of Incorporation
Since a legal entity will enable you to distribute shares to shareholders, staff members, and other founders, this might be the ideal option for you. The first document in your business law obligations that the Securities and Exchange Commission (SEC) intends for you to submit is your contract of incorporation.
Employment Contract
A term of hire, also known as an employment contract, is a legal document that specifies the conditions and limitations of a job between an organization and its workers. Such contracts might be informal even though they are typically documented in writing. The following items could be included in an employment stipulated terms:
- Start date
- Title and job description
- Length of shift
Intellectual Property Contracts
by the creator or founders of the firm. The copyrights on materials and licenses to safeguard business concepts and intellectual property portfolios are examples of this.
Non-Disclosure Agreements
A non-disclosure agreement serves two main functions: safeguarding and discretion. Data covered by an agreement on privacy might range from client lists to product specifications. A non-disclosure agreement can include business models, evaluations, and occasionally press releases with embargoes or assessments of goods.
Why are Business Law Contracts important?
To guarantee that your legal entitlements are upheld, you require a legally enforceable contract. Contracts should be drawn by an impartial notary with the potential for eventual disputes in mind, in besides defining everyone’s responsibilities, and ought to involve a dispute resolution process.
Another important degree of protection for owners of businesses and their assets is an enforceable contract. There are several ways to draft a legally enforceable contract. Working together to draft a written agreement outlining every element of the collaboration is a particularly effective strategy.
Are Business Law Contracts Required to be Notarized?
The official procedure for preventing fraud that gives transaction participants the assurance that a document is reliable and authentic is notarization. It is not a panacea that fixes every error in legal paperwork, though.
Since an agreement becomes enforceable by virtue of being signed, it is not required to have it notarized. The Civil Code also specifies that if acceptance, protest, and justification occur, a contract is enforceable in court. Therefore, even without being notarized, the contract is still enforceable if these conditions are met.
Why do Business Law Contracts need to be notarized?
A document that has been properly notarized is thought to be genuine and executed legally. From a legal standpoint, this means that once a document is notarized, you may trust what appears on it. The document can serve as reliable proof in the event that there are any disagreements about it.
The law mandates that certain contract types be documented in a publicly accessible document. In these specific situations, notarization is necessary because it gives a document public legal force.
Data Privacy in Business Law Obligations
The Data Privacy Act of the Philippines has become crucial now that information has become power. You must make sure that personal information handled by your company is protected when you handle business law obligations such as contracts.
In a nutshell, it can be crucial for entrepreneurs to have the appropriate legal arrangements in place. These contracts can reduce legal risks, promote commercial connections, preserve intellectual property, and offer transparency.
While getting legal counsel remains necessary before creating and signing any legal papers, entrepreneurs can function more efficiently and confidently if they are aware of the significance of these agreements. Starting companies can position themselves for a prosperous future by investing in the necessary measures to establish these contractual arrangements in effect.
