No matter what stage you are at in your business, a strong contract is one of the most important ways to protect your business. When you have a business based upon client interactions, every project can present its own unique problems. There’s no immediate gratification involved, such as, say, website design, but a professional contract is the first layer of protection for your business. Its purpose is simple, yet vitally important. Having professional contracts in place is like putting a seatbelt on your business: not something that you may appreciate immediately, but something you’re grateful for when it does its job. Here are the five main reasons why you need to invest in a professional contract:
5 Ways Contracts Protect Your Business
1. Avoid “He Said She Said” Scenarios.
How many times have you had a conversation with someone and you are sure you told them one thing, but they remember it differently? Although you typically hear about contracts in the context of written agreements, in many instances, verbal agreements are actually considered enforceable contracts. These agreements are called implied contracts.
If you say to your friend, “I’ll shoot 10 minutes of photos for $100”, and she agrees, you now have an enforceable contract. These contracts are clearly troublesome. Namely, they fail to cover all the terms the agreement should contain and are problematic when misunderstandings occur. Because nothing is written down, if things go south, you ‘ll likely find yourself in a “he said she said” scenario, which is costly, frustrating, and harmful to your business.
2. Contract Wording Matters.
Did you know that most people who write the bar exam actually consider contract law to be the hardest subject? Contract law is nuanced, and just the addition or subtraction of a single word in a paragraph can alter the entire meaning of the agreement.
Here’s a real life example: Recently, I represented a highly sophisticated business in a dispute that arose from a few words of one sentence of a contract. This contract was a few dozen pages long. Claims in the litigation were nearly a half a million dollars, litigation lasted over a year, and legal bills from both sides were a full six figures. By subtracting just four words from that sentence, the dispute never would have made it to court.