Customers are the life blood of any business, but sometimes
when dealing with customers things can go wrong. It might be your
fault, it might be their fault or it might be no-one’s fault —
however, if you didn't bother to sign a contract, then you'll all
suffer in the long run.
Why Do I Need
Contracts?
A contract gives you a sound legal base
for your business, and some guarantee that you're going to get paid
for your work without you having to ask the customer for payment in
advance. If a dispute should arise, the contract lays out what both
parties agreement on. If you end up having to go to court, the
contract is what the judge's decision will be based
on.
Without a contract, you could be vulnerable and open to
exploitation. Someone might claim the terms they agreed with you
were different to what you’re claiming, or they might say they never
signed up for anything at all and so they won't pay.
It’s especially common to see big businesses mistreat small ones,
thinking that they won’t have the knowledge, time or money to take
action. Essentially, contracts take away your customers’ ability to
hold non-payment over your head, and instead gives you the ability
to hold it over theirs.
Written and Verbal
Contracts
There’s an important distinction in the
law between a verbal (spoken) contract and a proper, written one. A
verbal contract is binding in theory, but in practice it can be very
hard to prove. A written contract, on the other hand, is rock-solid
proof of the terms of agreement.
You might assume you’ll
never have a dispute with one of your customers, but it’s all too
common to find yourself having a disagreement. They might want you
to do a ‘small’ amount of extra work to finish the job or to make it
better, not realizing that this could totally eliminate your
profit.
Therefore, you should be very wary of doing any work
on the basis of a verbal contract. However, if you trusting enough
to work only with a verbal contract, it could still help you,
especially if you had witnesses.
Won't It Be
Expensive?
A written contracts doesn’t necessarily
have to be a formal contract drawn up by a lawyer with ‘contract’
written at the top and signed by both parties. These kinds of
contracts are the most effective, but they can be expensive to have
produced and may even be intimidating to customers.
The most
common kind of written contract, is a simply a letter. If you send a
customer a letter (or even an email) laying out your agreement
before you start work, and they write back to agree to it, that
should be enough to qualify as a written contract, with most of the
protections it affords in place.
If you’re doing high-value
work for some clients, though, it could be worth the time and
trouble to have your lawyer write up a formal contract, or at least
doing one yourself and having your lawyer look it over. Formal
contracts will certainly give you the most protection if there is a
dispute, and there's nothing to stop you from making it a one-time
expense by re-using the same contract for every
customers.
Contracts for Small Purchases: the Terms
and Conditions
It would be silly to expect anyone
who buys a $10 item from you to sign a contract, or write back
indicating their agreement to your terms. In this case, you should
have a statement of the ‘terms and conditions’ your customer is
agreeing to when buying from you, and they should have to tick some
kind of box indicating their agreement before you send
anything.
Fortunately, it usually isn’t necessary to be
paranoid about contract law when dealing with small purchases, since
customers pay you first and receive the goods or services
afterwards. If you plan to offer any kind of payment plan or other
long-term agreement, of course, this should always be backed up with
a signed contract.
