5 contracts every business owner should have

As a business owner, your contracts are your legal shield. They define what you have promised, what others have promised you, and what happens if someone does not live up to the agreement. Even so, many small and medium-sized businesses run on oral agreements, loose e-mails or vague understandings, and pay the price when things go wrong.

Here are the five most important contracts you should have in place, and what they should contain.

Why written contracts are indispensable

Oral agreements are legally binding in Denmark, but they are hard to prove and enforce. A written contract:

• Creates clarity about what both parties have agreed
• Prevents misunderstandings and conflicts
• Gives a solid basis in the event of a dispute
• Signals professionalism to customers and partners
• Can reduce your liability through limitation-of-liability clauses

Investing in good contracts pays off, not because every agreement ends in conflict, but because clear terms make conflicts far rarer.

Contract 1: terms and conditions of sale and delivery

This is the foundation contract that every business that sells something should have. Terms of sale and delivery set the conditions for every sale and thus apply to all your customers at once.

What should they contain?

Payment and prices:

• Payment deadline (typically 8 to 30 days net)
• Interest on late payment under the Interest Act
• Price adjustment

Delivery and risk:

• Delivery time and delivery terms (Incoterms for international trade)
• When the risk passes to the buyer
• What happens on delay

Defects and complaints:

• The complaint deadline
• What constitutes a defect
• Remedy, replacement or a proportionate reduction

Limitation of liability:

• A maximum liability (for example limited to the invoice amount)
• A disclaimer of liability for indirect loss (lost profit, consequential damage)

Force majeure:

• What releases from performance (war, natural disasters, supply failures)

Dispute resolution:

• Choice of law (Danish law) and venue

The requirement of acceptance

Terms of sale and delivery only bind the customer if they are accepted. Send them with the offer and the order confirmation, and ensure active acceptance (signature or digital confirmation), not just a link in an e-mail footer.

Contract 2: employment contract

Employees covered by the Employment Certificate Act are entitled to a written employment certificate. Under the new Employment Certificate Act, which came into force on 1 July 2023, the duty applies as a rule if the predetermined or actual working time is more than an average of 3 hours a week measured over a 4-week reference period, or if there is no guaranteed amount of work. A written contract is good practice for all employment.

Especially important for smaller companies:

Non-compete clause: protects against a key employee leaving the company and going to a direct competitor or starting their own competing firm. Non-compete and customer clauses are governed by the Employment Clauses Act, which sets requirements for, among other things, compensation and for the clause not being unreasonably broad.

Customer clause: prevents an employee from taking your customer base with them on leaving. Also governed by the Employment Clauses Act.

IP and copyright: for computer programs created in the employment, the copyright as a rule passes to the employer (section 59 of the Copyright Act). For other material, it depends on a specific assessment, so the ownership should appear explicitly from the contract.

Confidentiality: cover trade secrets, price lists, customer data and processes.

Contract 3: non-disclosure agreement (NDA)

A non-disclosure agreement is the right contract before you share sensitive business information with anyone. This applies to:

• Potential partners and suppliers
• Consultants and freelancers who work with confidential material
• Potential buyers in a company sale (the due diligence phase)
• Collaborations under negotiation

One-way or mutual NDA

A one-way (unilateral) NDA binds only the recipient: you share information that the other party may not disclose. A mutual (bilateral) NDA binds both parties and is used when both sides share sensitive information.

Key elements

• The definition of "confidential information", that is, what is covered
• The purpose of the disclosure (only for the agreed purpose)
• Duration, typically 2 to 5 years
• Exceptions (information that is already public)
• Consequences of a breach

Contract 4: collaboration or supplier agreement

When you work on an ongoing basis with a supplier or partner, the relationship should be defined in a written agreement. A supplier contract specifies:

The services:

• What the supplier precisely delivers
• Quality requirements and standards
• Service level (SLA)

Price and payment:

• Pricing structure (fixed price, hourly rate, milestones)
• Payment terms
• Price adjustment and the conditions for a price change

Duration and termination:

• The contract's duration
• The notice period
• The conditions for cancellation on breach

Liability and insurance:

• The supplier's liability for errors and delay
• Insurance requirements

Confidentiality and IP:

• What is confidential
• Who owns the intellectual property rights to the deliverable

Contract 5: consultant or freelance agreement

If you use consultants or freelancers, whether IT developers, graphic designers or marketing consultants, you should always have a written agreement for each engagement.

Even for a task that sounds simple, it is important to define:

Scope of work: be specific. "Help with marketing" gives major problems of interpretation. "The creation of 10 social media posts including images and text for the June campaign" is clear.

Delivery and deadline: what is to be delivered when, and are there milestones along the way?

Fee and invoicing: fixed price or hourly rate, and when and how is invoicing done?

Ownership of the deliverable: as a rule, the freelancer keeps the copyright to the work produced. If you want full ownership or a licence, it must appear expressly from the agreement.

Confidentiality: what may the freelancer not disclose about your business?

Termination and changes: what happens if the task changes, and what does it cost?

Bonus: a shareholders' agreement for companies with a co-owner

If you have a co-owner in your company, a shareholders' agreement (for an ApS an anpartshaveroverenskomst) is a sixth contract that should be at the top of your list. It governs, among other things:

• Who owns what, and what it is worth
• What happens if an owner wants to sell
• What happens on an owner's death
• Decision-making processes and majority requirements
• Competition between the owners

For companies with two or more owners, this agreement is in reality a necessity.

Typical mistakes in contracts

1. Descriptions that are too general. "Consulting services" as a scope description is a recipe for conflict. Be specific.

2. No limitation of liability. Without a limitation-of-liability clause, your liability can in principle be very far-reaching.

3. The wrong choice of law. Are you using a standard contract from abroad? Check that Danish law is chosen and that disputes are decided by a Danish court, if that is what you want.

4. Forgotten force majeure clauses. The coronavirus crisis showed every business that force majeure is not a legal curiosity.

5. Contracts that are never updated. A contract from 2015 does not necessarily reflect the rules in 2026. Update the contracts when the rules or your business change.

Frequently asked questions

Must all contracts be signed physically?

No. A digital signature is legally valid in Denmark and the EU under the eIDAS Regulation.

Does Danish law apply automatically in my contracts?

Not necessarily if foreign parties are involved. Always state explicitly which country's law applies.

What does it cost to go to court in a contract dispute?

It varies considerably depending on the size and complexity of the case, and you do not always win. Good contracts prevent most cases.

Can I use the same contract for all my customers?

For standard B2B sales, your general terms of sale and delivery can cover most situations. For special agreements of great financial significance, the contract should be adapted.

What is the difference between a trading agreement and a single-order contract?

A trading agreement governs the ongoing collaboration. A single-order contract governs a specific task. Many companies use both: the trading agreement as a framework and the order confirmation as the specific agreement.

Conclusion

The right business contracts are not bureaucracy. They are your company's layer of protection. Five basic contracts cover the majority of your risk and cost significantly less to establish than the conflicts they prevent. Invest time in getting the contracts in place now.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.