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THE 5 MOST USED CONTRACTS BY BUSINESSMEN IN COLOMBIA

Our position as a law firm in Medellin and headquartered in Bogota, one of the most interesting cities for doing business in Colombia, and our more than 6 years of experience in the market, have allowed us to witness, advise, elaborate and even litigate in the framework of the contractual instruments most used by businessmen in this country.

Based on the above, we prepared an enunciative list, which aims to summarize which are the contracts that entrepreneurs use the most in Colombia, what are their economic functions and the way in which they are used, finally we will talk about the most frequent errors that we have evidenced and the advice we could give in this regard; these contracts are:

  1. Employment contract.
  2. Service contract.
  3. Partnership agreement, joint ventures.
  4. Lease agreement.
  5. Contract of sale.

 
Each of these contracts basically works as follows:

  1. Employment contract:

    This contract provides for a large percentage of the companies’ workforce, the essential elements of which are as follows:

    1. The personal provision of a service.
    2. Remuneration called salary.
    3. The subordination that entails the payment of social benefits and comprehensive social security.

 This contract has several modalities, which makes it versatile enough to meet all human resources needs in organizations.
 

  1. Service contract:

    This contract links another large percentage of the workforce of the companies, but also contracts a large number of services between entities that require services from others, so this can also be considered as a customer contract, the essential elements of which are:

    1. The personal provision of a service.
    2. Remuneration called fees.

This instrument does not include subordination, which is the fundamental differentiating factor between the provision of services and the labor contract.
This contract is undoubtedly the most versatile to meet all the needs of organizations and in our opinion is the most used and important in our current legislation.
 

  1. Partnership agreement, joint ventures:

    At this point we allow ourselves a wild card, that is, we will see two contracts instead of only one, since both fulfill a similar function, namely, they serve to associate several natural or legal persons in pursuit of a joint objective, sharing profits and risks under the established conditions.

These two contracts are widely used, particularly the first one, which has allowed the registration of a large number of Simplified Joint Stock Companies (SAS), although it is not the only option of corporate type, it is the most used; while the second one is usually chosen when collaboration or association is sought without creating legal entities.
 

  1. Lease agreement:

    This contract usually provides access to the use and enjoyment of movable and immovable property, which is particularly useful for a better management of the cash flow of the organizations; it is important to mention that the commercial leasing regime involves a series of special treatments regarding the rights and obligations of both parties involved.

 

  1. Contract of sale:

    Through this contract, goods are procured for the operation of business organizations and contracts are also entered into with their customers, particularly those engaged in the commercialization of material products.

However, it is important to mention that, although these are the most commonly used agreements, this is not always done in the most adequate way possible. Some of the most frequently made mistakes are: not using written contracts, not signing the contracts by the indicated parties, not reviewing the contracts for compliance or reality, which leads to defective compliance, among others.
In accordance with the above, we advise all businessmen, that when drafting, revising or negotiating this type of contract, to always count on an expert lawyer in contract negotiation, who can support them in achieving a balanced contract, in which the interests of all parties are present and satisfied in a fair measure.
 
 
Author: Santiago Pinzon Sosa.
Editor: Juan Esteban Vallejo Giraldo.

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