As entrepreneurship keeps growing, more and more people are learning the ropes of running a company. And the emerging gig economy means that millions of workers earn their living as freelancers.
Unfortunately, one piece that people often overlook is the need to protect themselves with contracts. So, why are contracts important? Well, I could answer that question for hours, but I’ll settle for an overview here.
If you’d like more in-depth help with contracts or other intellectual property matters, let’s connect. At Angie Avard Turner Law, LLC, I help you protect what you’ve created. You can schedule a time with me to learn more.
The Role of a Business Contract
Contracts are at the heart of any successful business. As amazing as your clients, contractors, investors, and vendors may be, you must have legal agreements with all of them to help ensure a good outcome.
People often think of a contract as limiting, telling you what you can’t do. But really, it’s better to think of a contract as freeing. It gives you the protection and boundaries to help make your company run smoothly, legally, and effectively.
Business contracts do many things for you and the other party, but here are four of the most critical.
1. Outline the Scope of Work
Have you ever worked on a project for someone else, and they kept adding one more thing? And then one more thing? And then another? When you have a contract in place, the scope and parameters of the work are in writing.
Your agreement will clearly delineate your role and deliverables, along with those of the other party. If they ask you to do something outside those parameters, you have the contract to fall back on as you remind them of the scope.
2. Verify the Amount and Timing of Payment
Let’s face it. You don’t have a business if you don’t get paid. And no one else has a business if they don’t get paid. Love might make the world go around, but money is a close second.
Just about every freelancer or entrepreneur has a story about someone not paying up for completed work. And almost every one of these stories has a common denominator: no contract in place.
It doesn’t matter how much you trust the person on the other side of the transaction. You need a contract in place to prove what they owe you, when they must pay it, and what happens if they don’t.
3. Protect Your Creation
If you are a creative of any sort, having an adequate contract is essential to protecting your intellectual property. Graphic designers, photographers, writers, and other makers should use contracts to clearly outline what rights a client has to the work they create. And it should also clarify which rights they are retaining.
Businesses of any size should have contracts in place to protect their intellectual property.
4. Create Legal Recourse
When a contract is in place, you have options if the other party breaks the agreement. As a legally binding document, you have legal recourse if you choose to pursue it.
Many times, just the thought of going to court is enough to get someone to hold up their end of the deal. If not, your attorney can advise you of the best next steps.
Why Are Contracts Important with Friends and Family?
Every business relationship should have a contract attached to it. And that includes any arrangement with family members or friends. In fact, a contract might be even more critical in this situation than it is with strangers.
Emotions can run high when you’re working with people you’re personally close to. Like, really high. Having a legal contract in place with friends and family helps everyone treat the transaction like a business deal.
Some examples of situations that might warrant a contract include:
You hire your sister to create a business logo.
You borrow money from your parents to purchase a piece of equipment.
You ask your realtor uncle to help you find commercial property for your business.
The bottom line is that no matter who the transaction is with, there should be a contract in place so that you have protection.
How Do You Create a Contract?
At face value, creating a contract is quite simple. You write down what each party must and must not do and how payment will work. Everyone involved needs to sign it, and then you have a contract!
In fact, a contract can even be oral instead of written, but this is much harder to enforce, so I don’t recommend it.
One of the most common questions people ask is, “Do I need a lawyer to make the contract?” My legal answer to that question is (spoken in a very hesitant, drawn-out voice), “No. Technically, no.” But the more helpful answer is that you should consider hiring an attorney for this work.
There are many ways that a contract can protect you, and when you try to do it on your own, things may fall through the cracks. When you hire a business contract lawyer, you will feel confident that you have a satisfactory agreement in place. And as your company grows and there is even more to protect, legal advice is crucial.
Many intellectual property lawyers offer templates you can purchase for your contracts and other forms. This option can be a budget-friendly way to get started when you need to draft a legal agreement.
What Do You Need To Protect?
It doesn’t matter how big or small your company is. You surely have something worth protecting. Your ideas, time, and money all deserve the protection a legal agreement can provide.