Why do I need to use a contract?

On my Instagram, I share tips every week specifically about contracts, in what I call Contract Tips Tuesday. I wanted to dedicate a post that answers some of my most frequently asked questions about contracts in a little more detail, using some examples of scenarios where issues may arise.

Why are contracts important for business?

To provide you, your business, AND your client, protection! Contracts provide a written document that outlines the extent of your business relationship and the full scope of the work carried out throughout a period of time, so that no one can claim any misunderstanding later down the road.

You absolutely shouldn’t skimp on contracts when you’re exchanging services for money. Even if you’re working with someone you know and trust, because you never know what may happen. Even if you don’t think your business is big enough, because all businesses need to be legally protected.

Contracts give you protection and something to refer to when disputes arise, and makes solving them a lot quicker and easier since there’s a papertrail.

What are the main reasons people need contracts?

There are so many reasons why contracts are essential to have… but the main one probably comes down to payments (specifically, not getting paid or a client asking for a refund). The first thing I ask when people approach me with problems like this is always, “What does it say in your contract?” Because having very vague wording, or no contract at all, makes resolving these issues much harder.

It benefits you to be as detailed as possible about payment terms, down to when payments need to be made, what method the client will be charged (eg. Stripe or PayPal), and even what happens when the client’s card fails - do they have a certain amount of days to fix it and try again? It’s also important to establish whether a contract immediately ends after a failed payment, or if you revoke access to anything until the problem is resolved.

Another common problem that comes up is expectations between the client and the coach/contractor. If you DIYed your contract, or downloaded one that wasn’t drafted by a lawyer, there may not be any clauses or details about what exactly a client can expect from working with you. And when things are unclear, a client may start demanding more from you, such as more frequent meetings, messaging you around the clock, requesting more course materials or resources, or expecting quicker turnaround times. A good contract outlines very clear expectations about what is expected of each party.

How detailed should my contract be?

Contracts are all about the little details that go into them. I always encourage people to be as detailed as possible in their contracts about what is expected of everyone. 

For example, if you’re a coach, don’t just write: “3 months of coaching” - explain clearly what that 3 month coaching container includes. Something like “1x 60 minute session per week, Voxer access with a 24hr response time through Monday - Friday 9am - 5pm” makes it clear what a client expects from you, and helps you set clear boundaries with them.

If your client is paying you by payment plan, you need to be clear about this too. Make sure the language specifies the entire amount they owe, how much each installment is, how often the client needs to pay, and via what method. For example, “$1800 paid via Stripe, in three monthly installments of $600 each.” 

This can tie together with your refund policy. It’s okay to have a blanket ‘no refunds’ policy, because at least that’s clear. But if you’re someone who’s open to partial refunds or a refund after a set amount of days, this is something that needs to be really clear in the contract, including how someone would go about requesting a refund.

You should also have a clause about your intellectual property, and what the client can or cannot duplicate and share - this can be anything from content, to course materials, to log in details. Having this clause will help you handle anyone sharing your intellectual property, because you can direct them to this part of the contract, and that is usually enough before taking legal action.

If my client and I make changes throughout our working relationship, do we have to draft and sign a whole new contract every time?

It can depend on the person and situation. If both parties agree to the changes, usually there is a clause in your original contract that states modifications are okay as long as it’s in writing. 

Do I need a lawyer-drafted contract? Or can I just write one myself?

I always recommend not drafting a contract yourself, or finding a random template from Google. Because depending on the type of work you do or the niche you’re in, These DIY contracts probably won’t have all of the little details that account for all of the ‘what if’ scenarios. Because even if you have 20 clauses in there - 10 of which are usually boilerplate clauses that all lawyers put in contracts - you still may not have information that will actually protect you and your business. 

What contracts or templates should I invest in before starting a business?

You don’t need to overwhelm yourself by buying every single contract right away when you first start a business. However, there are three important ones that are worth purchasing to cover your basic essentials:

The first contract I would invest in - which we’ve covered in this post - is a client contract. Depending on what kind of services you’re offering, this could be contracts for consulting clients, coaching or guest coaching, or an independent contractor agreement if you are the contractor for someone else’s business. 

The 2nd most important is a privacy policy for your website, as it’s required by law. Even if no one is filling out a form on your website, you’re still collecting their browsing cookies (for website analytics, for example).

Finally, terms and conditions are good to have on your website early on, because though not required by law, it promotes transparency between you and visitors (and potential clients) on what your policies are. Terms and conditions usually include a refund policy, governing law (eg. where disputes will be handled), disclaimers... it’s essentially a space to be clear that you’re not making any guarantees (eg. that they’ll make a $X amount of income in a certain time or obtain a certain result just from working with you). 

All other contracts can be bought over time as and when you start growing and scaling your business. My Coaching Starter Kit is perfect for those just starting out because it contains a client contract, privacy policy, and terms and conditions, plus a detailed instruction booklet on how to easily tailor them to your business. It’s an easy way to have legally sound contracts without having to spend hours on research, or spending thousands on hiring a lawyer to draft custom contracts for you!