Here’s a not-so-secret secret: I hate reading contracts and I don’t enjoy writing them either. They’re boring and long and I’d much rather spend my time playing with my daughter or watching Netflix. But I accept that being around contracts is part of the job because I’d much rather my clients have them than not.
A little while back a client asked whether there were instances where she could avoid the rigamarole and expense of drafting up new agreements. That is, whether her business could survive if she saved written contracts for the big projects, the ones that could bring in real money. I told her that I empathized with her position. As a fledgling business owner you have to make tough decisions about where to allocate your limited funds. Drafting contracts for small jobs didn’t seem to her like a good place to do that. I also told her that she could save money by reusing some boilerplate language from a contract I had previously drafted for her. That would cut down on costs. Then I yelled at her.
“You need your contracts in writing! Every time! On every job! For the rest of your life! For as long as your business exists! All your jobs! Every one! No matter how small! Without fail!”
Luckily she understood that my yelling was facetious, even if my words were not. Legally speaking, written contracts are not required in every situation. There are only a few scenarios in which contracts have to be in writing (we lawyers stupidly call this the Statute of Frauds). Those are 1) any sale or transfer of real estate, 2) any contract that would take longer than a year to perform, 3) a modification to an existing contract, and 4) in Massachusetts (as well as many other states that have adopted a version of the Uniform Commercial Code), any sale of goods or services worth more than $500. A failure to put a contract in writing for any of these would negate the agreement.
Even if my client wasn't selling her services for over $500 (she was), I still would advise her to put everything in writing because a good written contract performs two very important functions.
First, it provides instructions to both sides on how to perform the agreement. Ambiguity in contracts is a big killer of business relationships. I’ve seen too many go south because one or both parties thought the other wasn’t living up to their side of the bargain. And when there’s no contract to look at, it can be really easy to not live up to your side. Sure you might remember the big things: what you’re delivering, when you’re delivering it, how much you’re supposed to be paid, etc. But what about the small stuff? What happens if you deliver two weeks late? Who absorbs the loss if a lightning strikes your studio and burns down your work? Will you be getting paid all at once up front, upon delivery, or in intervals? Who will own the copyright? Will you have to deliver all your sketches, designs, and test samples, or just the finished piece? A well written agreement will lay all these issues out in the open and let you know how to deal with them.
Second, a good written contract will act as evidence of wrongdoing by one or both parties. I have a friend who was hired to build a piece of furniture for a client. Part of the design required metal work which she didn’t do, so she hired a guy to make this metal piece. She paid him, didn’t get their agreement in writing, and then he absconded with the money and delivered a subpar product two months too late. She spent months trying to resolve the issue. In the meantime, she nearly lost the client and went out of her own pocket to finish the project to the client's specifications. Now this guy might have flaked anyway, but imagine how much harder it is to prove he breached the contract when there’s no contract to compare his behavior to. You might say, “But Greg, oral and handshake agreements are legally binding,” to which I would respond, “Sure. But try showing your handshake agreement to a judge. See how far you get."
Contracts aren’t sexy. They’re not fun and are a huge pain in the ass. They will also make you a better business person and save you from a heap of trouble. So when you find yourself trying to avoid them, don't. And if you need some motivation to continue incorporating them into your business, take a cue from our good friend Shia LaBeouf and DO IT! JUST DO IT!