- Finance, Advice
How to make your contract your best business ally
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If you’re freelancing, you should have your own contract. Not your client’s contract, not your friend’s contract, your very own contract that’s written with you and your needs in mind.
One DIY approach is to cobble together a contract with your favorite terms and conditions from previous contracts.
This is a great beginner strategy, but when you’re ready to level up, here are five things you can do to make your contract even better.
1. Contract under your company’s name
Contracts legally bind the two people (or companies) that are identified at the very beginning of the document.
That means if you contract as “Darius Jones, professional designer,” you personally are responsible for all of the legal obligations in the contract, but if your company, “Darius Designs, LLC,” is identified, your company is responsible.
If you’re married, or own a house, car, retirement account or anything else you like and wouldn’t want to lose, contracting under your company’s name, instead of your own name, can protect you and your family from liability if something goes wrong.
2. Get their address (not the PO Box)
Your contract isn’t only a legal document, it’s an information gathering system, and one of the most important things it gathers is your client’s address.
You want to know your client’s address so you’ll know where to find them for all sorts of reasons: invoices, meetings, your annual hilarious holiday card, and, of course, a lawsuit.
If you ever need to take legal action against your client, even in small claims court, you’ll need to know where they’re located.
Most states require you to serve lawsuit paperwork face to face; if you only have a PO Box you won’t be able to do that.
3. Detail what your client is getting (and what they’re not!)
One of the places were freelance contracts traditionally fail is in the description of the work.
In most of the freelance agreements I’ve reviewed, the work is under described: it makes assumptions about what each party knows, doesn’t identify the things that aren’t included in the job, and summarizes a number of steps or deliverables in one generic statement.
Take the time to clearly explain what you’re doing for your client and what you aren’t.
This will be the section that will be most useful to you in the event of a dispute, so make sure it would be crystal clear to a stranger totally unfamiliar with the project (like, say, a judge or an attorney).
4. Limit your liability
Most contracts will have you make indemnification promises to your clients.
That means that if a promise or statement you made in the contract turns out to not be true, you’ll pay for any harm your client suffers as a result (another reason for following tip #1).
This makes sense, to a point. Your contract should cap your liability at a reasonable amount.
Common examples are the amount you made under the agreement or some multiple of the total value of the contract.
This will help you avoid getting side swiped by liability that you can’t cover.
5. Pick a place to fight it out
Contracts have a number of “in case of emergency” clauses that detail what will happen if things don’t work out.
One of those sections talks about where a lawsuit will take place if there ever is one. (Sometimes found under the heading “venue” or mentioned in “choice of law.”)
You want this place to be easy for you to get to. If you live in Georgia and the contract says you have to sue in New York, how likely is it that you’ll go after your client for the $5,000 they owe you?
Pick a venue that’s easy for you to get to or make an exception to the rule for small claims court (which is where you’d have to go if you were owed $5,000).
You can make these changes on your own or work with an attorney to make sure that the wording is exactly what your business needs. The important thing is that you review your contract on a regular basis to make sure it is supporting your business and protecting your interests.
Katie Lane helps freelancers and creative businesses handle their legal problems and negotiate like rock stars. Find her at workmadeforhire.net