Agreements, purchase orders, letters of intent, Paypal invoices for services not yet rendered….. what do all of these have in common? Arguably, they can all be considered a contract.
Some business owners think of contracts as a big, scary legal word that will cause all of their clients to run away, fast. Others realize that contracts have big value in both the present and the future tense. Here’s why:
1. Contracts define what you have agreed to do for the client.
The fancy word is “scope of work” or “scope,” but the concept is simple: the scope defines what you will do for the client.
For example, KJD Legal services will prepare the Articles of Organization and Operating Agreement for XYZ LLC.
2. Contracts define how much the client has agreed to pay you.
How much the client has said he will pay you is not only important for your bottom line at the end of the year, it is also an important marker for whether or not you are achieving your goals and milestones throughout the year.
Being clear on how much you expect to be paid for services rendered in the beginning of the relationship also prevents hurt feelings, confusion, anger and drama later in the process. The time to resolve issues over fees and scope of work is in the beginning, before the work is done, rather than after.
3. Contracts define when the client will pay you.
As a business owner, you not only earn money from people, you also have to pay money to people — whether we are talking about your employees, your suppliers, your bank or your landlord. Understandably, you need to know when your clients plan on paying you so that you can plan on when you will be able to pay the people and companies that you owe money to.
A contract makes it clear when the client should pay you. Some standards are at completion, 30 days after completion, or 60 days after completion. A contract can also define what the remedies are if the client doesn’t pay — whether there is an agreed interest rate on past due invoices or what court system you can file suit in.
4. Contracts can define what you won’t do for the client.
Contracts can also limit what you are responsible for. If the contract says that you will Create a full color logo graphic and place the logo on new business cards, then when the client asks that you add the logo to brochures you can justifiably ask for an addendum to your original contract or a new contract for this service. You don’t have to include the brochure in the original contract.
5. Contracts can define what you aren’t responsible for.
Liability can also be an issue. Your contract can state that your client expressly releases you from acts of negligence. Your contract can also define other areas that your client can release you from liability on ahead of time.
(c) KJD Legal