Almost every creative business owner will sign a contract they later regret. But how can you limit your chances of this happening?

That’s what we are covering in this week’s episode of Ask Kiff.

The short answer is that you are going to answer one question,

If everything goes haywire, will signing this contract help my business, hurt it, or leave me relatively in the same place?

Of course, to answer that question, you’ll need to understand exactly what the contract says. And which of the contract sections will be enforced in your state.

Watch the video | Read the show notes | Read the post

Show notes

• Enter your information below to grab the workbook that helps you decide if signing this contract is a good idea
• Check out this chart to understand how your state deals with non-compete clauses in an employment context
• Check out this chart to understand how your state deals with non-compete, non-solicitation, and other restrictive clauses (e.g. when you are an independent contractor)
• Learn more about the artist’s Courtyard membership community here
• Leave a question or sign up to vote on future episodes here

Post

I know that often it’s easy to think that the legal stuff doesn’t matter.

Or it only matters once you are big.

But the law is important even when you are just starting out. And that’s because it can drastically impact your business down the line.

To illustrate this point, I want to share with you Cory Huff’s story. Below, Cory shares the story of when he signed a non-compete clause out of necessity and how that impacted his business for years.

Over to Cory…

Without diving into the nitty gritty, tell us a little about a time you learned the “legal” ropes…

Contracts matter and they favor people with more money. Several years ago, I signed a non-compete agreement with an employer. It was, in my opinion, a completely unfair agreement, but I needed a job really badly at the time.

The job didn’t pay me enough to pay my students loans, so I started freelancing on the side to make ends meet. After a year of doing this, my employer found out and they summarily fired me for violating that non-compete agreement.

After they fired me, they sent me a cease and desist letter saying that if I kept up my freelance efforts, they would take me to court. I scraped together enough cash to talk to a lawyer, and the lawyer agreed with me that I had enough wiggle room in the contract that I could possibly challenge it in court. But I didn’t have the money to do so.

So instead of freelancing or finding a similar job, I was forced to get out of the market I was in and find a job where my skills transferred. I was pushed out of a field I loved working in because I didn’t have enough money to make the courts work in my favor.

So instead of freelancing or finding a similar job, I was forced to get out of the market I was in and find a job where my skills transferred.

Yuck, that doesn’t sound fun, how did you feel at that moment?

I was pretty unhappy. I had been approached by several companies about working for them, but on the advice of that lawyer, I declined all of them. I was really worried and stressed for a few months while I tried to find another job that my skills would transfer into.

Did this impact your creative business? How?

I had just started my business on the side. I couldn’t see how it could possibly survive, so I ended up finding another job in a different field. I stayed there for about two and a half years.

I was eventually able to steer my business in a different direction that was far enough away from that old employer that they couldn’t come after me, but it delayed my vision for a long time.

On the plus side, the new job that I got gave me an opportunity to see how a company can grow very quickly, and I was given several opportunities to interact with some very powerful and smart people.

In the long run, these unforeseen opportunities turned into massive learning experiences for me and my business is stronger, and different, for it.

What ropes did you learn from going through this experience?

The biggest thing I learned from the experience is that contracts matter, but they can only be enforced if you have the money to fight in court. I promised myself that, if possible, I would never find myself in another situation where I was pushed into signing a contract under duress.

Thanks, Cory!

So what can you learn from Cory’s story?

First off, pretty much every creative will sign a contract at some point that they later regret.

And you run the biggest risk of this happening when:

• the contract is take-it-or-leave-it
• it’s a last minute deal
• you are in a jam

As Cory mentioned, contracts aren’t 100% fair.

And often, contracts are written drastically favoring the person who created it.

Another thing to remember is that sometimes, contracts contain provisions that lawyers know might not hold up in court.

But the lawyer puts them in there to discourage you from taking action if things go wrong.

The lawyer will tell her client that it might not hold up because of how the laws work in that state. But she’ll use the boilerplate language that’s used across the country. Knowing that it might not ever be enforced.

So what happens when you are in these situations? How can you decide if signing the contract is worth it?

Take 10 deep breaths

First, sit down close your eyes and take 10 deep breaths. Because you need to calm down enough to answer this one question.

Answer this 1 question

If everything goes haywire, will signing this contract help my business, hurt it, or leave me relatively in the same place?

At first, you might not know enough to answer this question. And that’s okay.

To help you gather the data you’ll need to answer this question, you need to review the contract line by line to figure out exactly what it says.

(Psst…if you are a member of the artist’s Courtyard you can use the legalese translator to help you understand what some of those legal jargon terms mean! Not a member yet? Click here to learn more about how to join.)

And when you do this, you might find some outlandish sections or parts of the contract that might not hold up.

And so you decide even if this outlandish [section/part] of the contract is legal, am I okay with the potential outcome?

Now I’m not saying this is going to be easy. Because the reason you are feeling pressure to sign is that you are in a jam. You need the money to pay rent. You need the money to meet payroll. You need the money to keep your business alive.

But taking a breath, reading the contract thoroughly, and thinking things through can help avoid mistakes.

And these mistakes can cost far more time, money, and mental anguish than a few days of pressure.

So if your gut really tells you to run the other way, then trust it.

What you should know before signing a contract with a non-compete clause

I think it’s important to assume that every part of the contract is enforceable when you are deciding if you should sign a contract.

But I would be remiss not to point out that laws vary based on where you live. And they vary drastically when it comes to non-compete clauses.

So having an understanding of your laws helps you decide to what degree that contract section is valid.

Because the answer is very different if you are an employee in California or Utah to this question,

Will I be able to compete against this business in a few months even though the contract says I can’t for three years?

And that’s because California and Utah treat non-compete clauses very differently.

Learn how your state treats non-compete clauses (and other restrictive clauses) when you are an employee here and when you are an independent contractor here.

Your state laws won’t always apply

Another important thing to remember is that the contract itself says which state’s laws apply.

So even though you are running your business in California and California doesn’t really uphold non-compete clauses, that doesn’t mean it won’t be valid.

What you have to do is look towards the end of the contract to learn which state’s laws apply.

TL;DR

Almost everyone has signed a bad contract.

But you can reduce your likelihood of signing a bad contract if you answer the question,

If everything goes haywire, will signing this contract help my business, hurt it, or leave me relatively in the same place?

And if it’ll help your business or leave it in the same place, then go ahead and sign it.

Have you ever signed a contract you later regretted? How did you minimize the impact on your business? Share your stories in the comments.