Strategy for Creatives: Business Minus the Bullshit

The Basics of Contracts

January 18, 2022 Sasha - Business Strategist Season 1 Episode 15
Strategy for Creatives: Business Minus the Bullshit
The Basics of Contracts
Show Notes Transcript

How many of you have taken on a new client without a contract because you thought you didn't need one? Did you later regret it? You're not alone. But the fact remains that contracts are a necessary party of business. Contracts are even more important in the creative industry where a lot of things can be left up to subjective interpretations. If you're looking to get a basic contract for your creative business, here are some things you need to include. Disclaimer - I am not a lawyer and none of this post should be taken as legal advice. Consult a lawyer to ensure any contract is legally valid and appropriate for your business.

Episode Resources:
The Basics of Contracts for Creatives
Contracts for Creatives

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Sasha:

Welcome to Strategy for Creatives: Business Minus the Bullshit. Whether you're new in business or find yourself in a season of change, get ready to build a strategy, create an action plan and crush those goals. I'm Sasha, host a strategy for creatives. And I help female led businesses grow their brands in authentic, measurable and meaningful ways, without the stress. There's no sugar coated here, I'm serving up real tips and actionable steps you can take to help get you organized, get off the path to burnout and grow your brand like a boss. So go ahead, pull up a chair, grab a notepad, and let's talk business. Welcome to another episode of Strategy for Creatives: Business Minus the Bullshit. I, of course, am your host Sasha and today, as we continue on on our January starting a business the right way series, I don't really have a good name for it. But the last couple of weeks, I've been talking about how to set your business up for success, whether you're starting a business or whether you're already in your business, and you're just looking for ways to make it work better for you. We talked about whether or not your hobby needs to be a business and all of the things that you need to consider when making a hobby or business. And then last week, we talked about ways to narrow in on your target audience. Today we're going to be talking about the basics of contracts. And I'm going to start with a disclaimer. I'm not a lawyer, none of anything in this podcast should be taken as legal advice. I strongly suggest that if you have any sort of legal questions, consult a lawyer to ensure that you have all of your bases covered if you have a contract to make sure it's legally valid and appropriate for your business. All of this is just advice that I have learned over the years from coming up with my own contracts and working with other people. So now that the disclaimers out of the way, I want to talk about contracts and why you need contracts in your business. I know a lot of us when we're first starting out, we don't have contracts and truth moment, I didn't have a contract when I first started my business either. Luckily for me, I never was put into a situation where I needed a contract to be enforceable, where I couldn't resolve any issues that I had that were outstanding. But contracts are a necessary, necessary part of business. They are even more important when you are in a creative business, especially if you have a creative business because a lot of things can be left up to subjective interpretations. If people don't like things, if they don't like your ideas, your designs, things like that. So I want you, even if you are just starting in your business, to think about coming up with a contract. A contract for the most part is meant to protect you and the person that you are doing business with. So what are contracts right? Contracts, of course, are voluntary promises between two people, two parties, two businesses that are is enforceable by law. Contracts, of course, can be verbal, but I will always recommend that you create a written contract because verbal contracts are very hard to enforce. Turns to a he said she said type thing. So I'm always going to recommend that you have a written contract. In order for a contract to be legally valid, at minimum, there needs to be something that's called consideration, which is an exchange of value between two parties. So for most businesses, of course, that means money is exchanged for a product or services. But you can also have a product for product being exchanged, services for services being exchanged. So let's say that you are currently starting off in your business and you're looking to exchange services. Maybe you don't have the funds to really pay someone so you're going to offer up your service in exchange for their service. Let's say that you are a graphic designer, and you need some text for your website. So you want to work with a copywriter to get some copy for your website. You're going to offer them a logo. In exchange, they'll offer you words for your website. That needs a contract because that can outline explicitly what is expected of both parties. Written contract should also be signed by both people. And of course, the really important one is do you have to have the mental capacity to engage in a contract. That means you can't have contracts with minors, you can't have contracts with people who might not have their whole mental state where they are able to sign contracts. And of course, contracts can't be made for anything illegal guys. So any sort of illegal stuff that you may be doing, that's not enforceable by a contract. So don't worry about those things. You don't need that in writing. There are four categories of things that should be included in every contract. First off, you want basic terms. So this is the easy part of a contract is typically at the beginning. And it clarifies who and what is involved in the contract itself. So that means the parties involved aka you and whoever you're doing the contract with, what are your relationships to each other? So that means you'll see a lot of times the contracts describing as like client and designer, company, and employee, business to business, whatever your relationship is to each other, you want to outline that in the contract. When does the contract begin? If you have a certain start date, you want to say this contract is effective on XY and Z date. Any contact information such as address, phone, emails, and then the purpose of the contract. So the purpose of a contract could be exchange of services, exchange of products, exchange of goods, whatever the purpose of the contract is, you want to outline that in the basic terms of the contract. You also want to have business terms. And so this is the specific part of the agreement that outlines what is being exchanged. So that means who is delivering the goods and services. If for example, I am paying you to deliver me a graphic design, a new logo or a new website, you want to specify that what is being delivered, how is it being delivered. You want to specify who is paying. So if the person aka the client, or the contractor, whoever it is, is paying for the goods or service, make sure that's included and the dollar amount. Here, you can also break down any sort of payment schedule, what that looks like, but you want to make sure that included. And then of course, how long the contract is good for. Contracts do not and should not last into indefinite time periods. You want to have clauses in there that outline whether a contract ends at the end of a project, for example, when something is delivered, the service or good is delivered, the product is delivered. Maybe a contract is renewable every year. So you see that a lot in employment contracts with contractors. If it's a renewable contract, you want to say that you know, this contract is renewed yearly until both parties you know decide to do something else. You want to have how long the contract is good for. You also want to have what is called foundation terms. So this is where a lot of nuance in contracts happen. And it's important that it covers things that you might not even be thinking about. This is the part of a contract that really, if you are in a niche or business, or if you have a lot of liability in your business, aka people can sue you if you don't perform or if somebody gets hurt or something like that; this is where you want to have a lawyer. A lawyer will make sure that they are including key aspects of your contract and are making sure they're covering your ass in case anything happens. So you want to have any definitions of specific words, aka who is the company, who is the client, who is the independent contractor? What do the actual services mean, any deliverables. Specify what is being included as deliverables, this is really important. And you want to make sure that you're outlining everything that you are delivering for whatever a person is paying, or for that exchange of product or services. Because this is where a lot of people get tripped up. If you're not putting exactly what you're delivering, sometimes people can be expecting more. Sometimes they can be dissatisfied if they were expecting more and that's not what you had; that you weren't guys weren't on the same page. So you want to make sure that any deliverables are specified in your contract. You want to have a piece about how the contract can be terminated. Who pays if the contract is broken? And then what happens next? So think about different scenarios that a contract can be broken, right? Whether it's on your part or the client's part. This means if it's not working out for you, how can you terminate the contract? And what do you owe the client? If anything? Do you have a non refundable retainer or deposit? Do you have that they have to pay you 25% of the project costs in order for them to break the contract? Or is there a you know, a broken contract fee? You know, what happens next? Do they offer a refund? Are they not allowed to bash your business, you know, because they decided to stop working on your project? Whatever that is, you want to make sure that it is included in your contract. And this typically is a section that tends to change over time how contracts can be terminated. A lot of times we don't really think about too much of that. Because in an ideal world, of course, when we're first starting our businesses, all of our clients are perfect. And we know we're going to love working with all of them. And of course, that's not the reality, right? You want to make sure that you are outlining how a contract can be terminated. And review this section pretty often, if not yearly, or every time you have a bad client and you realize you've in been in a situation where your contract doesn't fully cover you. You want to make sure that you go back to your contract and you start including those things in your contract. And lastly, you want to have the body of law aka state federal, international whatever it is that governs any disputes if necessary, or litigation. So this tends to be kind of typical language in contracts. Typically wherever your business is in a state, that state has jurisdiction first, and then you know, federal whatever like that. But a lawyer, a good lawyer can help you figure out what needs to be included in that. And then lastly, you want to have what I call housekeeping terms. So this is for the things that don't really fit into any of those other sections, but should be included in your contract. Things like contact information, office hours. You want to let your clients know how they can reach you, when they can expect to hear from you, what turnaround is on their end, right? Maybe you have deliverables that are dependent on them replying and giving feedback for something... include that in your contract. What happens if they're late? Are you allowed to stop your project? Are you allowed to charge them a fee, in order to get the project back on schedule? Include those things in your contract so both parties are aware of what is to be expected in order to move the project forward. You want to include anything that happens in the event of unforeseen circumstances. So a lot of times in contracts this is, you know, the God clause, right. Like if a tree falls on your house, and you're unable to work or a hurricane picks up your house, or, unfortunately, in terms of death of either a client or the provider, right? What happens if something happens to you? What happens to that contract? You have to have something in there that says you know, what the parties can expect a resolution to. Maybe it means your estate pays them out. Maybe it means that contract is just terminated. You know think about those things because that should be included in a contract. And then lastly, of course, you want to have confirmation that those signing, of course read and understand the agreement, they know what they are signing. So that's a lot of information to take in. But I want you as your action item today, to at the very least start Googling contract templates. There's actually a very good resource. It's called contracts for creatives that I really like that has templates out there for creative industry folks to have at least basic level contracts and includes most things that you should include in a contract. If you at all can reach out to some lawyers. They often offer free consultations where you can ask how much it will be for a basic business contract. It's important and it's money well spent. Having a good contract will and can protect you in the event that things do not go well when you are working with a client. Of course, we all want our clients to be the perfect clients, we all want every project that we take on to be the best project that we've ever had. We want things to run smoothly, but the world does not work that way. And so we have to protect ourselves. And we have to have protection for our clients as well. So that way we understand what happens when things don't turn out the way that we want them to. If you run into situations where maybe you're working with clients, and you present them with your contract, and they start Xing out things out the sun. First and foremost, remember that contracts are of course negotiable, right? You can negotiate what you will and won't enforce in your contract. That's certainly up for debate between you and any given client that you want to do that with. But make sure that you're not giving up too much at the expense of keeping a client. If for example, a client says that, you know, maybe you have in your contractor, your response time is within 48 hours, and they X that out and say they need you to respond in 24 hours. Or maybe you have in your contract that you know a 50% retainer is due upon booking and they X that out and want to only do 25%. You don't have to negotiate on those things. You don't have to keep those things in your contract. It is okay to lose a client when they start nitpicking and things like that. A lot of contract manipulation has gone on during COVID, especially for those like in the wedding industry, in the events industry. Because there's so much up in the air and there's so much that we can't plan for. Think about ways you can be helpful to your clients and ways that you can amend your contract that gives them peace of mind but is also protection for you in the event that things don't happen the way that you want them to. Contracts, in essence are ways to protect our businesses, there are ways to protect us from making sure that we're doing things the right way that we can't get sued. And if we do get sued, that we are protected. It's ways for us to walk away from business without being or with being protected, knowing that they can't be retaliation or that we're not going to get taken for large sums of money. You want to have contracts in place before situations like that happen. So that way if and when they do, you are prepared. So again, think about contacting a lawyer if you can, most of them will do free consultations. If it's an expense, you know, lawyers of course can be expensive. I encourage you to have that as a business expense early on in your business. It is worth. It is worth the money to pay a lawyer to get you a good contract that will help you make sure that your ass is covered in the event that something does not work in your business. It is it is well worth money spent on a lawyer for that. Hopefully, you've been able to figure out if you have any of these things in your contract. If you don't have a contract, go back and listen to the things you should be including in a contract. Make sure that you're setting your business up for success by having a contract that's going to protect not only your clients, but of course your business. Are you ready to uplevel your business? Join the five day be your own CEO challenge. All the details are available on the website at www.by-sasha.com. If you liked what you heard, make sure you rate and review. It really helps other people find the show. And of course, following subscribe on your favorite podcast platforms. Want to follow me on social? I'm on Instagram and Facebook at Strategy By Sasha. Make sure you tune in next Tuesday for more business tips.