Learn from Magi Fisher, founder of The Artists’ Lawyer, on how to protect your business with airtight contracts. Staying legally proactive can help you improve business relationships while preventing risk and liability.
The nature of business is that it’s not always straightforward. Though being a business owner comes with endless rewards, it can be all too easy to run into a legal issue. Protecting your business means preparing yourself for the unexpected–for the moments we don’t think will happen to us.
Protecting yourself legally also means you’ll have better processes in place, and your business can run more smoothly. Whether you’re dealing with vendors, clients or partners, you’ll have healthier relationships to be able to grow and scale.
Magi Fisher, the founder of The Artists’ Lawyer, joined us as part of our HoneyBook Education webinar series to offer her expertise on contracts for creatives. Watch our webinar replay above, or read on to learn more about using contracts to protect your business.
Why It’s Important to Use a Contract
Without business contracts, you could be setting yourself up to be taken advantage of. As much as we don’t expect it, it can be easy to run into non-paying clients or those that attempt to go beyond your scope of work. With a solid contract, you’re setting the terms for your relationship and making sure there are boundaries set in stone (aka, set by contract).
It’s important to protect your reputation, time, investment in your business, and assets. You can do all this just by putting a contract in place. – Magi Fisher
If you don’t have contracts in place, you’re opening yourself up to greater risk and liability. Preparing ahead of time doesn’t mean you aren’t trustworthy. Instead, it’s a proactive way to maintain a professional, organized business. It’s also more client-friendly to make sure everyone’s on the same page too. Running into issues and establishing protections retroactively can interrupt your business and affect your client relationships in the long term.
How to Set Up Business Contracts
When it comes to contracts, you always want to make sure there’s an attorney involved. Even if you don’t think you have unique needs, a lawyer can make sure you’re protecting against everything that could hold you liable.
To get started, it’s okay to use online contract templates – just make sure you’re consulting with a lawyer or using a lawyer-approved file to ensure it includes all the language you need. With any HoneyBook account, you’ll receive several pre-loaded, lawyer-approved templates that you can use and customize to your needs. Keep in mind that you’ll also need to adjust your contracts according to the specific terms for each project. The timeline, budget, scope of work and more will change, meaning that information will also change inside your contracts.
Using HoneyBook contracts, you can set them up with dynamic custom fields to seamlessly bring information into your project workspace. For example, you can set up a custom field to capture your client’s location and set it as a “must-fill” item so it doesn’t get skipped over.
Don’t be afraid to negotiate your contract terms. Even if you have template contracts in place for most project types, adjusting the terms can be better for both you and the client.
Common Terms for Business Contracts
Though it’s important to have a lawyer review your contracts, there are still many common boilerplate terms that you’ll want to add to protect against common legal issues. Some of the most common boilerplate terms include:
- Limit of Liability – Restricts how much you could be liable for in worst-case scenarios, such as if you were to lose files or become unable to perform your services. The maximum amount that you’re liable for if you’re sued would be stated in this clause. One common example of your limit of liability would be the total amount paid by the client.
- Non-Waiver – Ensures you can choose not to enforce every aspect of your contract to the fullest extent. For example, if you want to waive late fees for a client, you would be able to do so without assuming that you’re waiving the rest of your contract.
- Governing Law & Venue – Controls where any litigation or legal action would take place. This means you wouldn’t have to fly to another state in the case of a lawsuit.
Boilerplate terms will vary by industry, so it’s important to understand the specific protections your business needs. The following are a few industry-specific clauses for different service-based entrepreneurs:
- Style of Work – Great for photographers and designers, this clause means the client is signing off on the provider’s specific style. You’re protected from redoing work if the client asks for a different style late in the project.
- Change of Scope – For graphic designers or web designers, a Change of Scope clause will protect you from clients slowly adding on more work. With this clause, you’re able to establish a new contract if the scope of work is moving beyond what you already agreed upon.
- Kill Fee – The Kill Fee clause sets a specific amount that the client agrees to pay if the project is canceled. This is usually used for designers if the scope of work starts to change and the provider and client mutually agree to end the contract.
- Group Setting Confidentiality – Essential for business coaches who may host workshops and group classes that might include confidential information. This clause makes sure you aren’t liable for that information.
Current Issues in Contract Law
Because of COVID-19, there are several contract clauses that are especially important right now. Among them include protections for travel and change of scope. Though these clauses are always useful for different cases, you may want to double-check if you currently include them in your contracts:
- Travel Warranty Clause and Reimbursement Clause – Important for COVID if there are flight delays or quarantines. Additional costs and travel expenses would fall on the client.
- Replacement at Your Discretion – This clause ensures that your client doesn’t need to sign off on a replacement if you need someone to help stand in for an event or other project. This is especially important for creatives in the event industry.
- Change of Scope – With a lot of change in the world, it’s important to protect against continually changing tastes and project timelines. This clause ensures that it’s up to your discretion to take on a project or not if it includes a big change of scope.
Sending Out Contracts and Saving Time
When you’re ready to send your contracts out, there are several best practices you can use to save time and maintain professionalism. Luckily, tools provided by HoneyBook let you automate much of the contract process and make sure you’re set up for success.
Setting Contracts to Auto Expire
First, be sure to set your contracts to auto-expire. That way, you can avoid a headache if someone takes too long to sign the contract. Once it expires, you’ll know the client took too long, and you’ll need to revisit the contract terms if you want to explore the relationship again. Using HoneyBook, you can make sure all your contracts auto-expire by setting a time limit in your account preferences. If you want to expire on a case-by-case basis, you can always set individual expiration dates at the contract or proposal level as well.
Ensuring You Have a Signed Contract and Payment
Don’t assume your project starts as soon as you send the contract. Something could go wrong or your clients’ priorities may change, thus affecting the contract terms or overall project relationship. That’s why it’s so important to auto-expire contracts just in case it doesn’t work out.
During the waiting period, don’t start the project work yet or begin turning away new business. Let your client know that you’ll wait until you have the signed contract in hand (and in email) to know that the project is officially beginning. Setting that expectation means your client will know to sign sooner to be able to kick the project off. It’s also best practice to have a signed contract before you accept initial payment. This way, you know the client has agreed to your payment terms. To combine your contract and invoice into one process, use the HoneyBook’s proposal software that helps you fast-track the booking process.
Whether your client signs their contract in-person or via email, be sure to send them a digital copy they can keep for their files. This way everyone has a record of what was agreed upon, should you need to revisit the contract terms.
Sending Automatic Reminders
Using HoneyBook, you can save time by scheduling automated contract and payment reminders throughout the project. Instead of having to remind your clients about payment, you can build an automated workflow using the HoneyBook Automations tool that is triggered as soon as they sign the contract and agree to your payment schedule. Your automated emails can also include your contract boilerplate terms and other reminders, such as office hours, cancellation policies and more.
Setting Your Business Up For Success
Setting your business up for legal success is one of the best ways to ensure smooth processes and longevity. With HoneyBook, you’ll have the tools you need to ensure proper documentation and a professional client experience. For more business tips, view our Chats With Small Business Owners webinar series. We’ve teamed with experts in various fields to cover everything from pricing to outsourcing–and how you can use HoneyBook to accomplish it all!
This post was updated in August 2021 when the HoneyBook Workflow tool was renamed to Automations. The HoneyBook Automations tool maintains the same functionality with the ability to automate communications, tasks and more. For more information about the Automations update, check our August 2021 Release Notes.