Some people shy away from the word “contracts” because a lot of time it triggers that feeling of “being sued”. A contract, by definition, is a promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies. In short, its an agreement between two or more people.
Listen To the Podcast Now
What is a Contract and Do You Need One?
Some people shy away from the word “contract” because a lot of time it triggers that feeling of “being sued”. A contract, by definition, is a promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies. In short, its an agreement between two or more people.
My favorite tool to use for creating, managing, and signing contracts is Hello Bonsai. Its an online portal that allows you to quickly and easily create and send a contract. Hello Bonsai also keeps track of when that contract was read and signed. Pretty handy when you’ve got a lot of moving parts in your project.
If you’ve ever done work for hire, the answer to ‘do I need a contract (an agreement)’ is YES! You should never do work for money unless there is something written down and agreed upon. Even if the work being done if for a friend or family member. Especially if its a family member.
A contract is NOT a piece of paper that you can bully people into doing something against reason or their will. Its a way for both sides of the table to have an understanding of what was agreed upon. We want to make clear our understandings with each other. Whether you call it an agreement, a contract, or bargain, both sides of the contract need to agree to the contract terms.
Contracts are tools used to help both sides understand the expectations from everyone when it comes to work being done.
When creating a contract you’re going to have at least 4 main parts to a contract:
- ID the Players
- Scope of Work
- Payment
- Schedule of Work
As always, please consult with a lawyer for your specific needs and verbiage for your contract.
If you want a copy of a Contract Template, click here!
4 Minimum Parts
ID the Players
You want to know what is a part of the contract for both sides. Who is doing the work and who is receiving the work. The first section of the contract should identify this and spell it out in a way that makes sense for everyone. You need to have it outlined as to who you are dealing with as well as who the customer is dealing with.
The contract needs to specify who you are actually doing work for, who is the point of contact, and what everyone’s roles are. Your goal is to remove guess work and assumptions.
An example would be
I am a freelancer in the United States in Georgia. I work through MowenWorks, an LLC, as a consultant. My client is XYX, INC, represented by Sean Smith.
Your definition of who the different players are and how they are being represented my change depending on your type of work. You will still be outlining who you are doing work for and who has authority and final say of your work.
Scope
The scope of the work should also be defined within your contract. It spells out WHAT you are actually going to be doing for your client. Where does this definition come from? Well, it should come from your Roadmapping Session (FHS Episode 22) that you did earlier in the project.
The scope will include not only what you will be doing with the project but what you will NOT be doing with the project. This can and should include things such as
- Hours of operations
- Deliverables
- Client deliverables
- Disabilities
- Your limitiations
In this section, you should also discuss what the agreed upon outcomes will be for the project. We need to spell out what they are hiring you to do and what the client will be, possibly, doing as well to help reach that goal.
You will spell out what is defined as “DONE” with the project so everyone can agree upon and have and understanding. You wont know if the project is done unless you actually define done. Never ending projects are no-fun…
If you want a copy of a Contract Template, click here!
Payment
Payment agreement is pretty important to…get paid… So we have to talk about expected costs and payment schedule up front. The payment section will outline the total cost and any milestones that will be needed to complete the project.
For example,
The Client will pay the Contractor in milestones totaling $1,100.00 (USD). The milestones will be invoiced as follows:
-
$550.00 (USD) on March 15, 2018
-
$275.00 (USD) on April 1, 2018
-
$275.00 (USD) on April 22, 2018
Make sure to include that you will need to take a deposit before work will begin. This is important as it signals the start of the actual project. Another tactic that you should use is to require the last payment be made at the agreed upon end date of the project.
Since you’ve defined what “DONE” is within the project, you’ll also define WHEN “DONE” is going to happen. Your last payment should fall upon this date or before (when the project is done).
Include verbiage into the contract that allows for penalties and fees if certain payments are missed, late, or the project is cancelled prematurely. This helps solidify the financial commitment for both side to work on the project until completion.
Schedule
How long is the project expected to take? We need to have an agreed upon end time and milestones for the project. The Schedule section talks about time frames, deliverable, and end dates. Don’t shy away from making this section as specific as you need to be. A lot of times, the project can have scope creep and the schedule section will help rein in on what is to be delivered.
Here is an example statement for the Schedule:
The Contractor will begin work on March 15, 2017 and will continue until the work is completed. This Contract can be ended by either Client or Contractor at any time, pursuant to the terms of Section 6, Term and Termination.
The milestones of what will be done is included in the Schedule section. You need to specify what is going to be completed and when. This also includes payment milestones for the work done.
Additional Sections
These four mane section described above are not always the end of a contract. There are usually additional sections that you’ll want to include with the contract. Here are a few of them
- Ownership and Licenses
- Who owns what and how can they be used
- Competitive Engagements
- You agree to not work for a competitor while the work is being done
- Non-Solicitation
- You wont take the clients customers from them while working on the contract
- Representations
- Defines the roles of the people on the contract
- Confidential Information
- Information and work is confidential
- Limitation of Liability
- No one is liable for breach-of-contract damages that are reasonably unforeseen