June 7th, 2021 | Written by Jaime Bell
5 Contract Essentials to Avoid Legal Headaches in Your Business
Having a solid business contract in place is essential to building trust with clients, setting expectations in advance and avoiding misunderstanding and legal headaches. In this blog post, Canadian business lawyer and founder of the Contracts Market Jaime Bell outlines the top clauses to consider including in your business contract plus some tips to avoid communication breakdowns.
Whatever stage of business you’re in, there’s lots of learning that comes with the entrepreneurial journey. Some of the lessons come easily, allowing you to pick yourself up quickly and move on and some others are a bit harder, sticking with you throughout your whole entrepreneurial career. As a contract lawyer who works side-by-side with entrepreneurs and hearing stories and experiences from my community, a lot of issues stem from one thing (or thereof): communication.
It goes without saying (but I’ll say it anyway), communication is key in all of our relationships. From our personal relationships and friendships to those we work with, the ability to keep lines of communication open in an honest and receptive way can help resolve issues or conflicts during and even before they arise.
We’ve all seen the ripple effects of poor communication. As a business owner, being able to have honest and clear conversations with your clients will help you both deal with issues that might evolve and allow you to resolve them before they cause the breakdown of your working relationship.
I want you think about a time when an issue came up with one of your clients or colleagues. Think carefully about what actually happened and whether or not communication was a factor in how it played out. Could you have stated your position more clearly? Could your client have raised the issue earlier to avoid confusion at a later time? Are you certain you were on the same page from the start?
Now I want you to think about how your contract featured in those issues. Did your contract state clearly your position on the issue? Or was there a bit of a grey area? Maybe you didn’t have a contract, or anything in writing between you.
Sometimes you can do all the right things and there will still be conflict, disagreement or points of contention. Not all issues can be resolved through better communication and a thorough contract, sometimes things just happen. But more often than not, open and clear communication solves most problems.
Often, the word “contracts” gets people’s backs up and stomachs in a knot. But I really just want you to think about your contracts as a written extension of your excellent initial communication; taking everything that you discussed and laying it out clearly. They are one of the building blocks for building a strong relationship, whether it be with your clients, contractors, employees or anyone else you wish to work with or form a relationship with in your business.
To ensure your contract is working for you when it comes to your working relationship with your clients, here are a few key clauses you should use in your contract plus some tips to avoid communication breakdowns:
1. A Very Specific Services Clause
I can’t stress enough the importance of being specific in your contract, especially when it comes to the description of your services. Ensure you lay out exactly what services you will be offering, the time frame, the number of check-ins or calls with the client and any other information you need the client to know. Be crystal clear on what is and what isn’t included in your fee and if you create a detailed proposal for the work, reference and attach it to your contract.
Another great way to ensure your contract is specific is to add an “Additional Services” Clause. This clause tells them what your hourly rate is for services that are not included as part of your services and can also act as a way to market other services you provide to literally the hottest lead you can have: a client who has already booked you and is happy with your work! Why not have your contract multi-task to protect you and work hard for you in your business?
2. Clear Timelines for Deliverables
Most freelancers include a timeline for the work they need to deliver and it’s important that this is realistic and doable so you aren’t in breach of your own contract. However, there may be deadlines you set that aren’t just for you! If your workflow is dependent on your client giving you certain information, ensure that you are clear with what you need from the client and when you need it by. Make sure that if your client waits until the 23rd hour to get you what you need, you aren’t put in a majorly rushed situation where your work quality (and mental health) suffers because of it. What if they miss that deadline? Ensure your contract states exactly what a missed deadline means for the remaining work such as change to the overall timeline, additional fees etc.
3. Cancellation and Rescheduling Clauses
If the last eighteen months has taught us anything, it’s that cancellation and rescheduling clauses need to be absolutely crystal-clear and as a business owner, you need to be able to plan and navigate in a way that works for you and your business. Whatever policy you choose to include, your contract should state it as clearly as possible. For example, do you charge a fee for cancellation or if work needs to be rescheduled due to client issues? If you’ve been paid a retainer fee and something happens, is that refunded? Expressly state them in your contract. It’s also important that your contract details the minimum notice period that must be provided by you or your client. These clauses should be detailed and provide a roadmap for each of you in the event they need to be relied on.
4. Ownership Clause
Protecting your work is incredibly important to your business so your contract needs to state exactly who owns what when the services have been delivered and what your clients can or can’t do with the deliverables you provide to them. As a freelancer, copyright of your work remains with you until unless you assign it to someone else in writing. If, as part of your services, you are assigning copyright to your client so they have free reign to use your deliverables, it’s important to include a clause to this effect, and that copyright is assigned only upon full payment of your fee.
If you’re providing a license to your clients to use deliverables, it’s important to clearly define how your clients can use those deliverables and any restrictions. Upfront communication is key here to avoid confusion and disputes in the future.
5. Approval of Works Clause
You can only do so much with the information you’re provided with so make sure your contract sets out exactly how your client is to approve the work before it is posted or published anywhere. There seems to be a lot of blaming going on around the internet (especially if you’re in the business of social media creation or management) recently when things get posted with errors, blatantly plagiarized, or unpopular opinions. Having a clause that details how and when work needs to be approved will ensure your client approves any content being posted or published and ensures they are ultimately responsible for that content so you aren’t liable for any fallout. This also keeps the lines of communication open, ensuring that there is feedback and check-ins happening on a regular basis.
If you’re getting that gut feeling that something isn’t “right” or communication seems to be sparse, speak up. You’d be surprised how many issues I’ve seen that could’ve been resolved if one party had said something sooner. Whether it be via email (the best way to document things) or by picking up the phone, engage in the conversation and ask your client what’s going on. Perhaps they have personal issues that are affecting their business. Perhaps it’s something they don’t feel confident bringing up. You won’t know any of this unless you ask, so don’t hesitate to reach out to them and find out what’s happening behind the scenes. This will also help you build rapport with your client. If you have this conversation over the phone or zoom, ensure you follow up with an email with everything you discussed so there is a written record of the conversation and you both ensure you’re on the same page moving forward.
And Lastly…Review Regularly
Regularly review your contract every few months to make sure it still reflects your business practices and is supporting your business. Update any clauses that are out of date or need changing to avoid issues you’ve navigated and learned from and the ever-changing business landscape and tech platforms. As you scale, grow and learn, it’s inevitable that you’ll find certain processes and practices that work and don’t work for you. Your contract is yours to tailor to ensure it’s supporting you and your business as it evolves.
When it comes to your contract, there’s no such thing as too much detail. Even if you think you might be going overboard, it’s far better to have these things in writing before you start any work for a client. By including the above clauses and information, your contract will make it clear to any prospective client what they can expect from working with you and remove any ambiguity or confusion that may arise later on. Ultimately, while open communication won’t solve every issue, having a system or practice in place which encourages you and your client to speak up will go a long way to resolving future issues.
There’s no doubt that starting your own business is one of the most exciting/hardest/frustrating/stressful/exhilarating things you’ll ever do and the legal stuff can be intimidating. Whether you’re just starting out or deep into entrepreneurship, having a thoughtful and well-drafted contract will ensure your relationships start out on the right foot and make you feel confident knowing you’re legally protected so you can focus on what you do best: building and growing your business.
Ready to level up your business with a legit contract that will actually protect you? Browse Contracts Market and get 10% off at checkout using the code WWF.
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