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The Dirty Little Secrets of Client Contracts

June 18, 2014

Interface Member

Lawyer for entrepreneurs, founder of Genavieve Shingle Law

genavieveshingle.com

As business owners, we all know that we need client contracts. But sometimes, we don’t always know why or what needs to be in them. As a result, we either avoid working with a lawyer, or we just find a generic contract online, modify, and end up using a contract that is completely wrong for our business. 

Why is this so bad? Well, instead of spending $500 upfront, it is now costing you thousands of dollars down the line because the contract didn’t directly protect your business.

Having a personalized contract is just like having personalized insurance. You don’t plan on getting sued or having a client walk-out mid-contract. But if it happens, your contract provides the blueprint of what will happen and the steps to follow to protect you.
 
Client, or customer, contracts provide huge protection in the land of entrepreneurs. These agreements set forth the parameters of the relationship between you and your clients. This includes, but is not limited to:
 
a.     The length of the relationship
b.    Cost of the program (including the refund policy)
c.    Structure of the program
d.    What happens if the client does not make payments (also, what happens if you don’t deliver as promised)
e.    Protecting all materials that you provide the client — a provision will be included that all of the materials provided are the ownership of YOUR company and that the clients are not allowed to give them to anyone else.
f.      Dispute resolution — just in case you need to take further legal action, you can actually choose that you want to have your dispute in a location that is convenient for you!
g.    Governing Law — it’s important to have the contract governed by the state where you run your business (and, of course, are registered), as these are the rules you are already playing by. 
 
It is important to note that this contract is not all about you as the business owner. Sure, this contract provides your company with protection and certainty, but it also provides the same for your client(s). Client contracts implement peace of mind in that if you, as the business owner, did something wrong or didn’t provide a product or service, they would be able to get their money back — or at least a portion of it. Remember, clients want — and deserve — protection, too.
 
If you will be sending the contract electronically, I always advise to send the document in PDF (or using an online signature platform like EchoSign) so that the client is unable to make any changes. Never send a contract in Word and always have the client sign first and then provide the client with a fully executed copy for their files.
 
If a Dispute Arises
 
The best advice is to try to settle a matter amicably and efficiently. Client service professions tend to be very subjective and not everyone is going to get along with everyone else. I will use an example for someone in a coaching relationship:
 
Should a client wish to terminate a contract early, there could be a variety of reasons: he/she was unhappy with your coaching style — maybe you didn’t mesh well, financial reasons, etc.  Look to the relationship you, as the coach, had with the client. Did you deliver everything that you promised? Is this person your ideal client? Do you want to continue to force this person to pay if they do not finish the program? If you answer “yes” to all of the above, then make this known in writing that you intend on honoring the terms of the contract as you honored your responsibilities. 

If the answer to any of the questions is a “maybe” or a flat out “no,” then maybe offering some sort of settlement would be a better route. The coaching industry is one that comes from a place of service; many times it is better (as Idina Menzel taught us) to let it go.
 
Now this does not, in any way, mean that a person can just stop paying because they don’t feel like it anymore. This is for a particular scenario in which both parties truly believe it best to end the relationship. 

For a scenario where a client just flat out stops paying and there is no amicable resolution, you would follow the steps laid out in your dispute resolution clause in your contract. I suggest trying to come to some sort of agreement just between the parties without lawyers. However, if this doesn’t solve the problem, then you would have an attorney step-in to write a demand letter and should it go further, file for an arbitration or proceed to court.
 
In the event that the matter proceeds to a court of law, the rules of contract law in most jurisdictions (make sure to check with an attorney in your state) provide that the only evidence that will be looked at is what is written on the four corners of the contract. As a result, no oral agreements or previous contracts will be considered when interpreting the responsibilities of the parties. Furthermore, unless there is any ambiguity with the terms of the agreement, the courts will look to the plain meaning of the language — not the actual intent of the parties. If the language is ambiguous, the rule of “contra proferentem” provides that the meaning will be interpreted in favor of the party who did not draft the contract. 

This is part of why it is so important to have an attorney work with you to draft a contract that is specific for your business and your needs.
 
Genavieve Shingle is a member of the DailyWorth Experts program. Read more about the program here.

*This document is for informational purposes only and should not be construed as legal advice Genavieve Shingle is an attorney only licensed in the State of New York and the distribution of this guide does not constitute an attorney-client relationship. 

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