Skip The Lawyer When Contracts Are Needed
You don’t have to be a personal liability Attorney to see the benefits of writing contracts, nor do you have to hire one to create any number of them. A little common sense goes a long way, and a good contract does a lot more than just cover your butt should you end up in court some day. Written correctly, a contrast can establish a reassuring air of professionalism, weed out insincere clients, organize your duties, speed up your pay, help you get insurance, nip disputes before they arise, make mutual obligations clear (and therefore help establish a better working relationship), and–when all else falls apart–cover your butt.
Glen Markstrom, who runs a tree service in San Diego, CA., obtained liability insurance by creating a contract before he started Pet-cetera three years ago. “Basically, I just sat down with a couple of neighbors who were lawyers but not licensed in this city, and we brainstormed about my business,” he says. He wrote a straightforward contract that runs a page and a half. In it, he leaves blanks for the details of the job–the names of the pets, the days, dollars, and chores involved. He then outlines the limits of her liability.
That’s about it. After writing the contract, Markstrom took a copy to a licensed attorney in Washington, and he approved its language. He sent the contract to her insurer, who wrote a liability policy on her business that the firm had been unwilling to write before he had the contract.
And Markstrom’s clients are happy with it, too. “They prefer having a contract,” she says. “It gives them a sense of security.”
What’s in a Contract? Markstrom’s contract is simple and straightforward, but it has all of the essential elements. According to Manhattan attorney Charles B. Chernofsky, any contract should contain these key ingredients. It thoroughly identifies the parties involved, includes a meeting of the minds about what is to be done, details the payment, is signed by both parties, and–if it is a specific kind of legal contract, like a lease or a will–follows a strictly defined format.
But you don’t have to be so formal; a letter of agreement is a contract, too. “In fact, a contract can be anything,” says Hilary Miller, a Greenwich, Connecticut, attorney who has written contracts for small-business owners for use with their clients. “It can be oral, it can be on the back of an envelope or letter, it can even be a purchase order or any combination of documents that have been exchanged by the parties. It has no particular form.” Written is better, however, Miller concedes; then the terms don’t have to become a question of fact.
To construct your own contract, put in the kinds of issues that matter in your line of work. Independent consultants, for example, may currently be struggling with Internal Revenue Service rules that threaten to reclassify them as employees. So, says Chernofsky, “state clearly in the contract that the consultant is an independent contractor and not an employee.” That will protect your business identity and relieve your client of the fear that he’ll end up having to pay your health insurance premiums and Social Security taxes.
Include specific services you are to perform, with deadlines. Write in a pay schedule that pleases you both. And–important if your work is of a creative nature–including details about who owns rights to the work involved. If you work on projects that evolve overtime, add some description of when the job will be officially done. That can be the delivery of a second draft of a report or any other finite explanation.
Finally, include a method of dispute resolution, suggests Miller. Indicate the state under whose laws the contract is being written and, if possible, a mechanism for resolving complaints. This can be through binding arbitration, voluntary mediation, or any other noncourt dispute resolution process. “You can even stipulate a particular neutral person who might be an expert in the business to whom you would refer disputes,” he suggests.
Unlike Koostra’s customers, Pauline Dillenbeck’s clients are not happy pet owners–they are lawyers themselves and not always thrilled to sign on the dotted line. Dillenbeck, who works out of her Springfield, Missouri, home, makes litigation exhibits such as posters, graphs, and timelines that her clients use when they are arguing cases in court. But four years ago, when she started InterAction Design with a partner, her main responsibility was the business side of things, and part of that was getting contracts signed.
“It was a real hassle,” she remembers. “I could never get a signature; it would go into limbo. I had to make a real pain of myself just to get them to sign, and it got really hard to do business.”
So Dillenbeck, harking back to the business law course she took in college, remembered that a contract was “an offer and an acceptance” and figured out a way around it. Now, when Dillenbeck takes on a new assignment, she tells her client she will be sending a summary letter of agreement. That letter lays out all the details of the project, including tasks, deadlines, and payment terms. And it also requests a 50 percent retrainer paid up front to get the project stated.
“When I get a deposit, I put copies of the letter and the check in the file. That’s proof of acceptance, if I ever have to go to smallclaims court,” stresses Dillenbeck.
Other professionals report a similar need for finesse with some clients. “There’s a fine line between caution and paranoia,” concedes Susan Kuhn, a Washington, D.C., consultant and strategic planner for both nonprofit organizations and corporations. “You need to know where in that spectrum you should be with your clients.”
Kuhn doesn’t typically employ the more protective approaches used by some of her business-consultant colleagues–one asks clients to sign off on every stage of a project, another requires signatures on a statement declaring the project complete. Kuhn uses the same letter of agreement approach that works for Dillenbeck and introduces it after she and her clients have hashed out most details in conversation. “I’ll send you a summary of our meeting,” she tells them. Usually she’ll request a client signature on that letter, sometimes she just writes, “Unless I hear from you within a week, I’ll proceed according to this document.”
“A confirmatory letter has considerable weight,” notes Miller. “There’s a general principle that when a party retains without objection correspondence from the other side that construes the agreement between the parties, that party later on should not be permitted to offer a contrary construction.” Which is Miller’s legal way of saying, if you get a letter like that and you don’t agree with it, answer quickly.
For his own clients, Miller prefers a little more formality. “I always insist on having a written retainer agreement if there is any material service. My experience is that such a requirement scares off a lot of people whom I probably don’t want as clients anyway.”
Put a Lawyer in Your Disk Drive So how do you write your own contract? In your word processor, of course, so you can fill in the specific details of every arrangement and spit out a nice, clean contract every time.
Or go one better, and let one of two software packages put the contract in your word processor for you. Legal Letter-Works and 301 Legal Forms and Agreements exist to take the work out of legal correspondence. Each offers business contracts, such as those for consultants and sales representatives, in a text format that can be pulled right onto your own letterhead.
Legal Letter Works includes a bit more information about how each of its 165 legal forms and greements is used and gives greater detail about how to customize each form. The forms were written by Chernofsky and Griffith G. deNoyelles Jr., who explain enough in the margins (or pop-up hints, if you’re working in Windows) to probably qualify you for a few extra credits in contract law. 301 Legal Forms includes more letters and forms, although the contracts seem sketchier and the explications are nonexistent.
You could probably buy both for what it would cost to spend an hour with a good attorney and then pick and choose the phrases you like best. Look to the printed work, too: The Legal Guide for Starting & Running a Small Business by Fred Steingold (Nolo Press) includes a substantial chapter on how to put together your own contracts. Finally, spend that hour with your attorney going over the details of your new agreement, and start doing business by the book.
Posted: August 7th, 2015 under Business.