As a lawyer for entrepreneurs, in my book, running a business without a written contract between you and your clients is a big no-no. Not only do written contracts clarify expectations between you two, but they help cover your booty in the event there’s ever a misunderstanding between you and your client.
While there are a variety of terms that should be in a contract, here are four issues that should be addressed in your client contracts:
What Each Party Promises to Do and any Deadlines for Delivering on Those Promises
At its core, a contract documents what you promise to do for a client (usually provide them with a service or sell a product) in exchange for what the client promises to do for you (usually pay you money in exchange for that service or product). In your client contracts, you should outline what those promises are and any deadlines for delivering on those promises. If you’re an event planner, for example, avoid general descriptions like “event planning services for Client’s wedding” and opt instead for a more detailed listing of services. This way it’s clear what services/products the client can expect from you. Remember, though events and weddings are your jam - oftentimes, your couples have never worked a professional like you before. Therefore, they don’t have a complete understanding of what each party’s role is in the process. The contract is a great vehicle for communicating those expectations – both what the client can expect from you and what you expect from your client.
Payment Terms
You agree to provide a service or sell a product in exchange for a fee to be paid by a client. So, your contract should address what the payment terms are for such fees, like:
- What is the amount the client owes you and when will it be due?
- Will these amounts be paid in installments? If so, what is the schedule for payment?
- Is any portion of the fee non-refundable?
- Are there any expenses that the client will need to reimburse you for?
- What method of payment will you accept?
- Will you charge late fees for overdue balances?
How Disputes Will Be Resolved
You hope it never happens to you – but unfortunately, most business owners are bound to experience a dispute with their client at some point in their career. There will come a day when you and your client just don’t see eye-to-eye and what started out as a great working relationship quickly goes south. That’s why, your contracts should include a clause providing how the parties will resolve conflicts. There are three main ways in which disputes are resolved – mediation, arbitration, and litigation. Also, most contracts will specify which state’s laws will apply and which state will be the exclusive venue for resolving disputes. Before drafting this clause in your own contracts, do your research and think carefully about the time, cost, and rights associated with each dispute resolution option and the best venue for resolving these disputes.
Conditions Under Which Either Party May Terminate the Contract
Much like disputes, the hope is that a client will never terminate a contract. But things happen - events get cancelled, couples break up, budgets get cut. That’s why your contracts should address the circumstances under which a party can terminate the contract and any obligations that must be met upon termination. A few things to think about:
- Does the contract allow the parties to terminate the contract at any time, or does it require that the terminating party notify the other party in advance of its decision to terminate the contract? If so, how much advance notice is required?
- Upon termination, do the parties have specific obligations they need to uphold?
- Does the contract address how you, as the business owner, can terminate the contract? Or does it only address how a client can terminate?
Let’s Do This
- If you don’t have contracts in place for your business, get one. You can work from a solid contract template or hire a lawyer to draft one for you. To help get your contracts in order, you can find customizable contract templates tailored to a variety of industries like event planning, event rentals, floral design, photography, consulting and much more here.
- If you already have contracts, spend some time reading through them. Do you understand all the terms? Does the contract accurately reflect your current policies and procedures? Remember, to regularly review and update your contracts as your business grows and evolves. With the purchase of one of these contract templates, you’ll also receive a contract review checklist to make sure you’ve dotted all your I’s and crossed all your T’s before you send or sign a contract.
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