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Why You Must Always Use A Contract And How To Write One

I’m not a lawyer, however I have one on retainer to review all contracts I’m going to enter into. Attorneys are also great if you get into a scrape. While most people don’t like them, as an entrepreneur, you should. They can literally save your business.

I’ve encountered a number of entrepreneurs that don’t use contracts. This is extremely dangerous. Contracts set the tone for your relationship with your client, and set clear boundaries.

If you are operating without a contract, watch this video. I’ll show you each item we use in our contracts. Then, find an attorney and have one written for you, and ALWAYS use it.

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Click here to watch the video.

Lawyer Alternatives

I understand if you don’t find the idea of paying an attorney $250/hr. to write your contract, though it’s highly recommended. And while this is not legal advice in any way shape or form, here are a few things you can do to cut down on your expense.

  1. Find a contract and have an attorney update it. This is what we did, and giving our attorney a starting point saved us around $1,000 in legal fees. This way you’re saving some money, and you’re sure to be legally covered in your state.
  2. Though I have never used them and cannot endorse the service, LegalZoom has contract services available.

However…

The Bottom Line

The bottom line is that you should always use a contract. And seek legal advice when creating yours.

What’s Your Experience?

If you’ve had a negative experience from not having a contract in place, please help your fellow entrepreneurs and tell us your story in the comments below.

Comments

  1. Well intended advice, but potentially misguided and misguiding. I’ve been in business for over 35 years and have executed thousands of business deals –many with formal agreements, many without, most with simple memos of understanding (MOUs) that were not reviewed by an attorney. The fallacy in your advice is that it seems to suggests to the inexperienced business person that it is “the contract” that protects you from the litany of troubles you cited. Your underscore this advice with the recommendation that everyone should secure an attorney to write or review their agreements. This no doubt is music to the ears of all attorneys. In fact, the courts in every state are filled with disputes between parties that were drafted by not just one attorney, but in many cases by two teams of attorneys representing each party. How is this possible if what you say is accurate? The answer is found in the fact that no mater how well drafted a legal document; no matter how detailed and specific the language; no matter how many contingencies are addressed in the clauses; there is almost always a way for a person who is not doing business in good faith to find a loophole or a way to circumvent the contract. I once had a businessman tell me that law suits are a business strategy. He was essentially saying that even when you have a contact the other party can extract concessions from you if they know that they are more prepared to litigate than you are. What 35 five years of business has taught me is that an agreement is good for clarifying terms and avoiding honest misunderstandings, but your best assurance against the troubles you cite is to be diligent about the people with whom you do business. More times than not there are signals along the way that offer clues to the character of the person you are dealing with — the way they negotiate, little breaches of very small commitments that are ignored. A person doing business in good faith will seek to self-remedy lapses in a contract. Whereas a person whose sense of what is right is defined by the agreement will seek to hold you to each letter of the agreement even if it becomes clear the agreement isn’t fair. Bottom line, a contract is a secondary measure. The primary measure is developing keen communication skills and keen judgement about when to lean into a business deal and when to walk away. In short, your best defense is the ability to quickly distinguish a good witch from a bad witch.

    • Hi Errol,

      Thank you for adding your advice and experience.

      I was not attempting to say, nor did I explicitly state, that a contract can 100% protect you from shady business people, or their bad business habits. And as you say, some people do use law suits as a business strategy. The term “patent troll” had to come from somewhere.

      And I agree with the basis of your comment – that first we, as business people, should work on communication and judgement. No contract will save you from a lack of those.

  2. Great points, Robert! I’ve worked alongside folks who didn’t believe contracts were necessary – and they’ve always been the ones embroiled in disputes over work. And – it comes from both sides.

    Contracts are a wise idea from both perspectives – and they offer protection for all parties. The benefit from the agency/provider side is that expectations are set in stone when you have a contract in hand – no surprises.

    We use contracts in our business now – and it demonstrates a certain degree of professionalism, too. Wouldn’t enter into an arrangement with any client without one. :)

    Thanks for sharing the post, brother!

  3. great vid, thanks for sharing. on the hunt for a contract to use are a starting point.

  4. Hi Robert, wise words. On those rare occasions when there is a dispute over something, it really gives you peace of mind to have something in writing.

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