subject: Is Your Contract Legal? [print this page] Author: Marijo McCarthy Author: Marijo McCarthy
When is a contract not a contract? When it's not in writing? A client called me this week with some good news. His graphic design business was picking up, he had weathered a tough economy, and orders for his services were coming in on a more regular basis. As we chatted, however, he said something that gave me pause: "All of a sudden I have no time to deal with contracts; I just have to get my proposals out the door. We're already working for the client before we have time to deal with a contract!" I pursued that a bit, not wanting to sound like a super-cautious lawyer, but still wanting to raise the issue of protecting my client's valuable services. A few more minutes of conversation elicited that, in many instances, my client was providing services to clients for whom his company had worked in the past, so he was "comfortable" with the relationship. Gulp! Now, don't get me wrong in most instances an oral contract is as "legal" as a written contract (with the exception of real estate). So yes, my client's "proposal" certainly constitutes more "evidence" of a contract than two parties who just begin to do business with each other with no other formalities. But it's that very concept which made me take a big gulp and suggest that he consider some essential elements of the contract for which he has no evidence. Let's just highlight a few: What's the timeframe and what are the client's expectations? In other words, when do the services you provide begin and when do they end? How are you to be paid and when? What happens if you aren't paid on time? Can you stop work? Can you terminate the "contract?" Can you charge interest on late payments? What happens if you have to pursue collection activity against a non-paying client? Can you include your lawyer's fees in the final demand for payment? Who owns the "product" which your services create? And, most important when it comes to creative work, how is the client's "approval" measured? In other words, when can you stop doing "revisions" on your nickel and when do those endless changes become the client's responsibility? Well, I could go on, but you get the gist. When you provide a service to clients and just plow ahead, there's a risk: nobody, not you, not your client, has agreed in verifiable format on the essential terms of the contract into which you both have just entered! Again, let me stress this fact: you may very well have a contract, but how do you prove the details? So here's a suggestion for professional service providers: Create a basic boilerplate contract which covers all of the essentials and attach a description of your work which, of course, varies with every single client. Do not put your talented services at risk by leaving the end result to the memory of others! You'd be amazed at how those memories fade when it comes time to pay the bill, particularly if you haven't been billing the client monthly as work progresses.
Now, having said that and shared with you the strong warning I gave my client, there are, indeed, times when an oral contract may be preferable! But that's a discussion for another day. The information you obtain here is not, nor is it intended to be, legal advice.
You should consult your own attorney for individual advice regarding your own situation. Copyright 2009 Widett and McCarthy, P.C. About the Author:
Marijo McCarthy is principal of Widett and McCarthy, P.C., a Boston area law firm that helps Massachusetts small business owners build successful companies, one contract at a time.
