Disclaimer: Yes, I am a lawyer, but I’m not your lawyer and this article does not create any lawyer-client relationship. The information presented is based on Ontario and Canadian laws. This article is legal information and should not be seen as legal advice. You should consult with a lawyer before you rely on this information
Where my small business owners at?
When I asked my friends on my instastories, over 80% said they are an entrepreneur, business owner or blogger! That’s amazing!
Which got me thinking, how many small business owners turn their minds to the contracts they use to conduct business?
Did you start out creating a template contract or written terms and conditions when dealing with clients or customers? Or did you develop it as you went, learning from your mistakes? And if you do, who does the drafting?
I may be biased, but I do believe in the power of a well drafted contract.
A contract will not prevent every issue from happening, but it will help avoid the most common issues. And can really help to allocate risks and avoid conflict. For example, what happens when a product breaks in transit? Who is responsible for the cost to replace? What if is something is time sensitive and there is a delay? What if the customer doesn’t like the final product or service delivered? What happens when you deliver as promised and the customer/client refuses to pay?
As a lawyer I am trained to think of all the risks I can and come up with ways to avoid them. Sometimes it can feel like I am getting in the way of business from getting done, and sometimes I do. But if I can prevent a potentially multi-million dollar problem from happening, not to mention the stress that goes with it, I think it is totally worth the effort!
How to draft a Contract
So, in the perfect world, you got yourself a great lawyer and they walked you through your business processes, and figured out the risks involved and put together a good template for you to follow. Or if you recieved a contract you went to your lawyer to look over it before you sign on the dotted line.
But I know that is not always possible. I get it, lawyers are expensive and who really has the time to think about all the what ifs and legal stuff anyways? You just want to start selling and making money, right?
But a good contract can help get you to get paid faster, and avoid expensive mistakes or conflicts in the long run. It is worth the effort and expense to get it right the first time.
So where do you start?
Even if you can’t afford a lawyer right now, here’s a few of the basic things that I suggest you consider and put in writing in your terms and conditions. Even if it is in an email, or appears on an invoice or quote rather than a contract. Setting these terms before you get started can help make the whole transaction or engagement go smoothly.
The goal is to set everyone’s expectations up front to avoid issues later on. It doesn’t have to be a beautiful piece of prose, or use lawyer words like ‘herein’ or ‘notwithstanding’ – but it should be clear and concise so everyone involved understands what is expected of them.
Key contract terms to consider:
Outline who is the client and who is the customer so there is no confusion. Who has authority to make changes? Who will make or receive payments? Are you dealing with an individual or a business?
And everyone should sign off or agree on the contract or terms before getting started. If you do decide to make changes later on, confirm everything in writing – an email will do – and make sure everyone agrees so there is no confusion later on.
What is the contract for? Essentially this is the scope of work that is intended to be covered by the engagement. If it’s a product, describe and quantify it. If it is a service, then describe it as best you can.
In my food photography world, things like number of hours of shooting, number of images, image angles, resolution of images, formatting, editing etc. Are all important to set out clearly. You should also clarify what the client intends to use the product or service for to ensure you know what you are getting into. For example, if I am shooting for Instagram my images will be very different than if I’m shooting for my blog or for print.
Location is important too. Especially when working with parties that are in different provinces or countries. This will also affect price. Since I’m located in Canada, I always like to clarify – Are we talking in CAD or USD?
The location of certain work may also matter. For example if you are an influencer or blogger providing your services to a chain of restaurants do they want you to shoot on location? Or can you get take out, and shoot at home?
There are two big ‘when’ to consider – when to get paid, and when to deliver the product/service.
‘Delays in timelines and schedules are one of the most commonly debated issue in my day job. Sometimes a small delay at the front end can cause millions of dollars of losses at the back end.
If there is a deadline to get the work done set it out clearly. Is the deadline a hard date or can it be adjusted with the other party’s permission? If you can’t be sure of the deadline right now, can you agree to at least some durations for work, or some key milestones, so that when you know for sure, the deadline can be calculated easily?
And also consider what happens if there is a delay. Depending on who causes the delay you may want to cover different consequences. What if it is not anyone’s fault? Like if a postal strike delays delivery of a product. Do you just wait, or find an alternative delivery method, who pays for alternative delivery? What if it gets caught in transit?
What happens if the delay is caused by one of the parties and results in the other suffering consequential losses? These are things that do not have a direct impact to the business but can result in some financial loss to the business. For example if I am a service provider and I am booked by one company or person. If they cancel last minute, I will not only lose that business, but I may have also lost out on other opportunities. That lost opportunity would be my consequential losses. Should the person cancelling last minute be responsible to also pay for my lost business elsewhere?
With payments, are you taking a deposit or pre-payment upfront? (there is a difference between the two, but that is a topic for another day). Do you ask for payment before completing final delivery? If not, what happens if the customer doesn’t like the final product or service received and refuses to pay?
Why are the parties entering into this agreement or business relationship? This can make all the difference when there is a dispute. If you thought you were hired to provide photographs for a company’s social media, but turns out they use these to for a print campaign you will likely negotiate the terms and pricing differently.
Is there a confidentiality obligation that goes with the engagement? If this is a launch of a new product, maybe you need to ensure that everyone is aware of the obligations to keep things a secret until the appropriate time.
Knowing the why for both parties is important.
There are so many hows:
- How will disputes be resolved?
- How will intellectual property issues be handled? e.g. copyright, trademarks etc.
- How will you deal with liability issues if one party causes the other party to suffer a loss or damages?
- How will you terminate the business relationship? What will happen when it terminates?
It really does depend on the individual need of each business relationship.
The point is, that if there are specific means and methods to achieving the end result you want, specify them as much as possible.
Learn from Your Mistakes & Read the Fine Print!
The truth is, the more problems you encounter in business, the more you will learn and the stronger your contract will get as long as you start to address these issues in your contract terms.
I think I have probably said this like 100 times already but the more you set out in writing the better. Always be reviewing and adjusting your own terms to make sure they work for you and your business.
Also, If you are on the receiving end of a contract, read it carefully make sure you understand what it says. It shouldn’t be confusing or unclear. And don’t be afraid to ask for changes to other peoples ‘standard’ contract terms.
There is so much more I could go on about, but I think this is getting long enough. Hopefully I’ve given you a few things to consider that could help you out in your business.
One of the biggest pet peeves I have is when a client says ‘oh but this contract is too long!’ My response is always: Well you can have a shorter contract if you like, but then you need to know that you are increasing your risks and will need to find other ways to avoid them.
You need to decide which risks you want avoid now, and which risks you are OK to pay for in the future if they happen. That is what will determine the length and strength of your contract terms.
Because at the end of the day, whether it is a $100 or $1 billion contract, when there is a problem, the number of pages in your contract will not matter. If something goes wrong, you can suffer much greater damages that just the value of the work or services lost. Sometimes it could be a loss to you personally, or your company reputation at stake.
Got any questions? Comment below or send me a message. I’m always happy to help.
When doing business, put it all in writing. Preferably in a written contract or proposal.
Make sure your contract or terms covers the basics: who, what, where, when, why and how. Set expectations in writing before you start work, and always check in to make sure everyone is on the same page.
Don’t worry about the number of pages in a document, worry about the risks being covered by what is written on those pages.
Get a written contract.