When running a small business, it’s often easy to overlook the importance of a contract when starting a new project for a client. We all would like to think that one’s word and a firm handshake are all that’s needed to seal a deal, but that just isn’t so, certainly not in this day and age where any triviality can be cause for a lawsuit.
Contracts may well be one of the most important pieces of any business dealing, no matter how big or small. They serve a dual purpose, both for the business owner and for the client.
Legal Coverage
The first, and maybe most important, purpose of a contract is to cover both business owner and client from legal action in the event of a disagreement. If the client feels like they aren’t getting what they requested from the contractor they hired, they are likely to attempt to pursue legal action. Having a clearly worded contract in place, signed by both parties, can typically head off any legal action before it even gets started. Client and contractor alike are able to review the contract, determine if the disagreement is covered its terms, and quickly resolve the disagreement without the need to go to court or pay out expensive legal fees. It protects the business owner from being sued by the client; likewise, it protects the client from similar legal action by the business owner. We live in an age of increasingly frivolous lawsuits, and a good contract will help mitigate the damage from potential legal mishaps.
Project Roadmap
The other purpose of a contract is to provide a clear roadmap of the project to be completed. A proper contract will spell out, in detail, every step of the project from start to finish — what work is to be done, what assets are to be collected and used, what software or publication rights (if any) need to be licensed and acquired, which party is responsible to provide assets to the project, and so forth. This gives both client and contractor a clean picture of the work to be done, the timetable for completion, and the fees to be collected (or rendered). It also helps steer a project back on course if either the client or the contractor wants to deviate from the established contract in one way or another. In such cases, either the existing contract needs to be amended — and signed again — or a secondary contract needs to be drafted, agreed upon, and signed by all parties to cover the additional work.
In a Nutshell
To put it simply a contract is essential to any project in which multiple parties are involved and should be one of the first things to be completed before any work is done or begun. It provides legal protection for all and shapes the direction for the project at every stage of development. The particular form and format of your contract may vary depending on your jurisdiction, so it’s always advisable to have a lawyer advise you on the type of contract you should use just to be sure it will hold up in the event of a dispute.
And I can’t emphasize this enough — always, always, always start your project with a signed contract, even if you’re doing business with a friend or someone you trust. Disagreements happen, even among friends. A well-worded contract can not only protect you but salvage a valuable relationship.
Now, get that contract, and get to work.