Do I have to give clients a formal written contract?
The reason that most creatives hate contracts is that many contracts are 20-pages long and stuffed with legal jargon.
But did you know that your “formal” written contract doesn’t have to look like that to be valid? That’s what we are covering in this week’s episode of Ask Kiff.
The short answer is only three things are required to create a valid contract:
an offer
acceptance of the exact offer
exchange of things of value
And contracts can come in many formats other than your traditional long, stuffy contract.
Instead, a contract exists to make sure that you are on the same page. (By literally getting on the same page.)
A contract makes sure that you have the same understanding about roles, responsibilities, deliverables, and how the project will progress.
It exists so that you don’t unintentionally let the other side down because you had different understandings of what was going to happen.
What’s required to create a valid contract
The truth is that creating a valid contract is quite simple. You only need to:
say what you will do for her
have her agree to it
exchange whatever is outlined
You can write a contract on the back of a napkin. And as long as these three things are present, a court will honor your contract.
And surprise, surprise, legalese isn’t one of those three things listed above.
There’s also big difference in purpose between a proposal and a contract. Your proposal is usually step one in the process and opens the door to futher conversations. While your contract is usually step two in the process, once you’ve agreed on what you’ll do for the client. (This video breaks down when you’ll send each and if you can combine them!)
Yes, there are times as a lawyer I use legalese, but I do it for strategic reasons.
I do it sometimes because the legal community has adopted a definition for that legalese. And I don’t want to fight about what I was trying to say.
I do it because my client wants a formal looking contract.
I do it because the other party expects the contract to look a certain way.
But I also write contracts that don’t contain an ounce of legal jargon.
As I mentioned, for a valid contract, you only need three things. You need an:
offer
acceptance of the exact offer
exchange of things of value
It seems pretty obvious, that for a contract to be formed all parties have to agree on what’s involved in the deal.
But, sometimes it can get tricky to determine the line between negotiation and a valid contract.
Offer and acceptance
One of the basic rules of contract law is that one party must make an offer and the other party must accept it.
While there are a few exceptions, contracts do not have to be in writing to be valid (although if they aren’t in writing it boils down to a he-said, she-said situation).
One party must make an offer and the other party must accept the exact offer.
Can an offer expire?
Offers can have an expiration date.
You could give a potential client a quote and tell them that it’s valid for 90 days.
Or you could say that this is your 2019 price for this project.
Or you could say that registration for a workshop closes 48 hours prior to the workshop.
Or you could say that your course is on sale through either April 15, 2019, or until 15 seats are sold.
**Note if you do this you might be creating an option contract, which means the offer cannot be withdrawn until the time period ends.
When the offer doesn’t have an expiration date, it remains open for a “reasonable” time.
Can you take back your offer?
As long as an offer hasn’t been accepted, the person who made the offer can withdraw it (or revoke in legalese).
Counteroffers
Counteroffers are what we think of as negotiating a contract.
It happens when you respond to an offer with a slightly modified offer.
And because you are slightly modifying the offer, acceptance happens if the other person agrees to your slightly modified offer.
Counteroffers and what the deal actually is after a series of counteroffers is another area that can lead to confusion and frustration.
Which is why it is critical to document in writing what you’ve agreed to so that you have something to point to if you ever need it.
Exchange of things of value
You might have heard the term consideration; it’s just the legal word for exchanging things of value.
Most of the time, it’s mutual promises to each other to do something in the future.
In a business sense, this exchange is often I’ll give you a product or service in exchange for you giving me money.
However, it’s important to remember there are two important parts to this:
exchange of things of value
in the future
Because of that, there is no exchange of things of value when it comes to gifts or things done in the past. So even if you agree on the terms, you won’t have a valid contract.
Some contracts must be in writing
Even if a contract is valid it might not be enforceable. (Meaning you can’t do anything about it if the other side doesn’t hold up her end of the deal.)
There are six times a contract must be in writing to be valid:
marriage
year or more
land
executor
goods of more than $500
surety
(The law school mnemonic for this is MY LEGS!)
However, only four of these are likely to come up in your business.
Contracts for a year or more
If a contract will last more than a year, then it must be in writing.
So if something will last for 13 months or two years, then it must be in writing to be enforceable.
However, contracts that are for an unknown amount of time don’t have to be in writing to be enforceable. (e.g. We’ll work together until we decide we don’t want to work together anymore.)
And that’s because they could only last a few months or they could last several years.
Contracts for land
If you are renting, leasing, or purchasing a studio, warehouse, or other building or property, the contract must be in writing to be enforceable.
Contracts for the sale of goods valued at more than $500
Heads up to all of you with wholesale accounts!
If your wholesale account is buying more than $500 of your products in a sale, it must be in writing to be enforceable.
Contracts where you are promising to pay the debt of another
In legalese, these are called surety contracts.
And you might have encountered them when we were young or when your child turned 18.
These contracts happen when a landlord, bank, or loan company is willing to enter into a contract with you, but only if you have someone that will pay if you can’t. (Or guarantee the contract.)
Where this comes up in business is when you create a brand-new LLC. Because it has the same credit history as an 18-year-old kid, not your credit history.
So a bank, landlord, or credit card company will allow your LLC to do something, but only if you personally guarantee it. And if the LLC can’t pay, you are on the hook to pay from your personal accounts.
Why you want a written contract no matter what
Even if you aren’t in one of those six situations where it has to be in writing to be enforceable, you still want your contract in writing.
Why?
Because the whole point of having a contract with those you work with is to make sure you are both on the same page. And the easiest way to get on the same page is by literally getting on the same page.
So the next time you embark on a project, I want you to write out in your own words what you:
plan on doing
expect them to do
will be exchanging
Don’t worry about cramming legalese in there.
Don’t worry that you won’t be able to make the other person hold up their end of the deal.
Because as long as you have included those three things, you’ve got a contract. The legalese is optional.
Want help writing your contract? Then I’ve got two resources for you:
join us in the artist’s Courtyard for $45/month and get access to a “Write your contract” course that includes step-by-step instructions and seven contract templates
How to sign your contract
You don’t have to mail your clients a paper contract and have them sign it in pen and mail it back to you.
You don’t have to email them a PDF, have them print it, sign it, and scan it back to you.
Instead, you can:
use a service like HelloSign to have them sign electronically
use a service like Dubsado or Honeybook that will send a contract as part of your onboarding process
send them an email explaining your understanding of the deal and asking them to reply with a “Yes!” if they agree
have an “I agree to terms” checkbox as part of your checkout process
It doesn’t have to be hard! In fact, the easier you make it, the more likely your clients will sign your contract.
Hi! I’m Kiff! I believe that you can have ease in the legalese of running your creative business.
Each week, I send out an email to help you confidently strengthen your business’ legal foundation by sharing my experiences and knowledge.
Wish you had access to the kind of lawyer that you want to join for coffee?
You can! I’m your friendly legal eagle (and licensed attorney). And I’d love to pop in your inbox to help you cut through the red-tape and share how there can be ease in the legalese.
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