It’s when a business trades its products or services with another business. No actual money is exchanged. Instead, each party gets the benefit or value of the other party’s products or services without it directly hitting their bottom line.
For example, if you are exchanging a $500 service for say, a twenty $25 t-shirts, and neither party will owe the other party any money, that is a barter.
It can be a handy resource particularly when you are starting a business and engaging with other new businesses who also want to save money.
Do I Need a Barter Agreement?
Yes! Considering that money is not being exchanged there can be even more to lose if things do not go as planned. For example, you don’t want to end up in a dispute over what was exchanged and who owes what.
You also have to be mindful of the value of what is being exchanged. A barter agreement makes it clear what each service or product being exchanged is worth.
This way both parties are in agreement about what is being exchanged and for what value so there is no confusion later.
What Should Be in a Barter Agreement?
Products / Services to be traded:
The barter contract should list specifically what is being traded by each party whether it be products or services.
If it is a product, list how many, which sku or variant (if applicable), color, size, etc.
If you're trading a service, be precise here as well with the type of service, how many hours will be granted (if hourly), how long the service will be provided, such as 1x service on a specific date or for a number of months (provide the start and end dates).
Fair Market Value:
You definitely want to include the value of what is being exchanged. Although no money will change hands, the value of it will.
So be clear in the contract about not only what is being exchanged but what that product or service is worth.
If you do not list the fair market value, that is what the market rate is for your products, then you do not know whether you are getting a fair exchange for your offer.
No one wants to feel as if they are being cheated in a deal even if it is a trade. Providing a service is time consuming and what is being provided is valuable. Products cost time and money to produce.
So be ready to trade but know the value of what you're getting in the process!
Date of the Exchange:
And of course, don't forget to the include WHEN the trade will occur. This is an important deal point because just like the close date of other deals like a sale of a business or purchase of property, we need to know when the actual exchange will happen.
Be sure to include that date, but you can also include the time and even the location. But at the very least, include the date or an "on or about" date for the exchange.
You don't want this to be an evergreen contract with no ending. The contract is specifically for an exchange of products or services on a specific date and then the contract expires.
And note that although the exchange is on the date, it's OK if that is more applicable to products. If it is a service that will be provided at a later date, that is fine as long as that date(s) is provided in the contract.
The contract should have standard legal terms well. This includes a clause for how to terminate the agreement, in case you change your mind before the trade.
My template also covers intellectual property ownership, warranties and limitation of liability.
While this is a trade and not a purchase, you still want standard legal terms that protect you should something go wrong in the transaction. In fact, that is a must in every business deal.
Need a Barter Agreement Template?
Bartering has been in existence forever and for good reason. It’s a simple way to conduct business without actually paying for things.
But! As great as bartering sounds, you must be protected. To get the full value of your bartered products or services, use a Barter Agreement. This template will cover the specifics of what is being traded, its fair market value, the date of transfer and more.
Enjoy the time honored tradition of bartering in modern day business with an attorney-drafted barter agreement.
If you’re interested in trading with other businesses, get my Barter Agreement Templateand start trading with legal protection today.
My Barter Agreement Template contains:
Products or Services Provided
Fair Market Value
Intellectual Property Ownership
Limitation of Liability
Quick Instruction guide with tips
Solid Legal Protection
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To learn more about Legally Good Club and get tips on how to protect your business legally starting today, watch my free legal workshop.
This blog posting is provided for general informational and educational purposes only and is not provided for specific, individual legal advice.