Oh contracts, those crazy documents that can make or break your deal, your business OR YOUR LIFE.
Ok that last part was a little intense, but kinda true. There are a lot of questions swirling in business owners’ minds about how to write a contract, when they need ‘em, and who needs to sign (and hey, do electronic signatures count?!)…but no matter the situation, we can consult, review, or draft these bad boys for you so that you’re completely covered and not signing away your firstborn. Below are some common inquiries and just a taste of the types of contract-issues we can help you with.
I’m partnering with someone I really trust, so why do I need a contract?
I feel uncomfortable sending a contract.
Hey, contracts don’t have to be adversarial or cold. The goal of a contract is to ensure everyone involved knows exactly what their responsibilities and duties are plus provide a method for addressing issues that may arise in the future. This really translates to one word: clarity. Clarity is always our main concern when drafting a contract, not clarity for lawyers, but clarity for everyone involved who will be reading the contract. We’ve worked with hundreds of entrepreneurs in a variety of industries and have heard many times from them that their customers really appreciate getting a contract from them.
While there are certain formalities required in contracts, there are also ways to make them more user friendly if you’d like. For instance, we’ve changed the headings on the different sections to align with a client’s brand. So instead of generic headers we like to use ones like WHAT HAPPENS WHEN YOU SMILE FOR THE CAMERA, WHAT HAPPENS IF THERE IS A HURRICANE and THE “NO PROMISES” CLAUSE. Little changes like this can go a long way in making a contract align with your brand more and getting advice from an attorney on what is essential and what is perhaps unnecessary can go a long way in drafting a contract that protects your business in a way you are comfortable with.
How do I know what type of contract I need?
Generally, the type of relationship you’re dealing with will determine what agreement you need. Two common types of contracts you may need are service agreements and independent contractor agreements. We offer a wide variety of contract services for small businesses from client service agreements to asset purchase agreements. Check out these contract descriptions to see if we have what you’re looking for.
We signed a contract, now the law as to enforce it right?
You would think so right? And most of the times, the answer is going to be yes. A valid contract—buttoned up nicely, with all the legal requirements of a contract—is enforceable. But, even if you manage to meet all of the formal elements of the contract (consideration, proper signatures, blah, blah, blah) if the subject matter of the contract is illegal, the contract won’t be enforced. Rule of thumb: you can’t make a contract to break the law. Simple enough, right? Also, if you draft some provisions that aren’t quite illegal, but that a court considers “unconscionable” (in english: ridonkulous), those provisions may not be enforced. So, keep it legal and keep it sane.
Are electronic signatures valid?
Yes! Under a federal law called the ESIGN Act, electronic signatures are as valid as paper and ink signatures for most business contracts, which is great news for those of us who do business online and communicate primarily through the Internet.
If you’re in Canada, PIPEDA is the law that gives legal weight to electronic signatures. However, this law differentiates between “electronic signatures” and “secure electronic signatures.” So, if you are in Canada or signing a contract that is enforceable in Canada, consider using EchoSign or one of the other providers that allow you to obtain a “secure electronic signature.”
If you are in the European Union, the Electronic Signature Directive, also gives electronic signatures the same effect as handwritten ones.
Digital signatures are valid in a host of other countries as well. Allllllll the cool countries are doing it!
How do I manage getting a contract for every person that I work with?
The first step is making sure you have the contract to get signed! Once you have a solid agreement for your services or products, take some time to make sure it fits ALL of your offerings. You may want to make versions for your most common offerings that are easily editable templates so you’ll always have the right one to send out when someone says yes. Think about how to deliver the contract for easy signature(s)—i.e. electronic signatures like we mentioned above. For more on this topic, check out this post.
I made an oral agreement with someone but I don’t have a contract so do I have to deliver?
Oral contracts are enforceable. This often surprises people, but believe it or not, if you and a client come to an agreement and don’t put it in writing, you are both still legally bound to that agreement. In a lot of ways, oral contracts are almost worse than having no contract at all, because you’re stuck with a legal relationship that has uncertain terms and boundaries, and if something goes wrong, it won’t be clear at all what you can do about it. So as you can imagine, we’re not big fans of oral contracts. Take the time to draft a written contract that properly sets the terms of the relationship and you’ll definitely thank yourself later.
I’m getting sued in another state, how does that happen?
Many contracts include a clause that addresses which laws will apply and where proceedings will take place in the case of a dispute. U.S. lawyers call these venue and jurisdiction. So if you’re being sued in another state it may have come about because of a contract you signed or an agreement you entered into online (for example, vis a vis Terms and Conditions) which designated that state as the venue for any legal disputes arising out of the agreement. This is one reason why it’s important to review your contracts thoroughly before signing them. You want to be sure you know what you’re signing before you agree to the terms!
Someone wants me to sign a contract but I have no idea what it says. What do I do?
A pretty solid rule of thumb is don’t sign something you don’t understand. If a dispute arises down the line, claiming that you didn’t understand the contract probably won’t help you much. Understanding contracts is not something that requires a law degree (though that does come in handy at times). There are many resources to help you understand contract basics so you can be informed before you sign. One of our favorites is Small Business Bodyguard because it includes an entire chapter dedicated to basic contract law for entrepreneurs and goes through a contract clause by clause too. If the contract you’re considering will have a major impact on your business or involves large sums of money, you may want to consider having a lawyer review it for you. A contract review doesn’t have to be extremely expensive and could save you a huge headache and large sums of money down the road. For example, our contract reviews start at $650 for a basic agreement. If you’re talking about a relationship worth tens of thousands of dollars, that’s a small price to pay for piece of mind before you sign.
I googled a contract template, that’s good enough right?
There are loads of contract templates and samples available online. However, as templates go, most are very general and may not cover all of the aspects of the particular agreement you’re trying to make. Moreover, when it comes to contracts, quality is very important. A poorly drafted clause or omission can be detrimental to one of the parties should a dispute arise.
If you do decide to use a template, we recommend that you make sure it is from a trusted and verified source. You’re likely using this document to enter into a pretty serious agreement, so you want to make sure that, at the very least, all of the basics are covered.
I don’t want a complicated contract, can I have something short and sweet without all the legalese?
You could, but it’s probably not very wise. While it’s a good idea to draft contracts in language that’s easy to understand (whenever possible), you really should include the “boilerplate” provisions as well (You know, those last few paragraphs of most contracts. The ones that are dense with legalese. The ones you probably never read…). Those paragraphs are actually really important. Keep in mind that whatever terms you don’t include in the contract will be filled in by contract law, which, depending on the context and the particular dispute, may or may not be to your advantage. Why take the gamble?
Is a statement of work good enough when I start working with someone?
A statement of work is unlikely to include all the pieces a proper contract include so we wouldn’t recommend relying solely on that. A statement of work generally covers the scope of work only so it’s going to leave out key factors you should be concerned with in any business relationship. Remember, you want to include all the basics of your relationship, methods for resolving disputes that may arise, plus all the boilerplate to properly protect you.
What happens if I want to get out of a contract I have signed?
If both parties agree, you can rescind the contract by consent. Easy peasy. However, if you want to rescind and the other party doesn’t consent, things can get sticky. Exactly how sticky depends on your grounds for wanting out of the contract. Suffice it to say, in this situation you’ll probably need to lawyer-up at some point, which, as you know, can be pricey. That’s why it’s so important to have solid contracts that you fully understand before you sign!
What are my options if someone is not fulfilling their end of a contract with me?
It depends. Exactly how and to what extent they aren’t fulfilling the contract can make a difference. It also depends on whether the contract contains provisions on how the parties should proceed in that situation. A lawsuit is of course the ultimate option. But, if the contract has been well-drafted, and if both parties are open to communication, it often doesn’t have to come down to that.
How do I sign a contract for my business (i.e. am I signing individually, or as the business entities)?
When you are signing a contract for your business, you are signing as the legal representative of the business rather than as yourself personally. This makes the relationship of the contract between the business and the other party rather than you individually as the other party. This is really important when it comes to issues of liability.
I am subbing out some work for a client, is my subcontractor bound by the terms of the client service agreement?
Whoever signs the contract is who matters here. So, the contract you sign with your client binds you and the client. If you need to sub out the work, the terms of your client service agreement do not extend to the subcontractor so it’s a good idea to have an agreement with them. It should cover similar items as your client service agreement but would be tailored to your work with the subcontractor rather than your work with the client.