Why you need a contract

You want to sign a contract?! Why on earth do we need to sign a contract? Can’t we just do this on a handshake? Can’t I trust you?

Well, you could but both parties are leaving themselves wide open for potential hassles that a signed and agreed upon contract would eliminate. If you feel nervous asking your clients to sign a contract, consider these points:

  1. Contracts provide a description of responsibilities. Rather than suffer through the confusion of wondering what each party’s responsibilities are, you’re better to have everything in writing. This will help avoid confusion or disagreement.
  2. Contracts bind parties to their duties. It is incredibly disruptive if one party attempts to back out of an agreement. A contract will bind the parties to the previously defined description of duties eliminating this problem.
  3. Contracts can establish a time frame for duties. If you need work performed and performed within a certain time frame a contract binds the party to that time frame. As a consultant, you might want to require the other party to provide adequate and timely access to key personnel, for example.
  4. Contracts can secure payment. No one likes to be stiffed for work performed and a binding contract provides a written legal document establishing an agreement to be paid for services rendered.
  5. Contracts provide recourse when the relationship falters. If the relationship between the contracted parties deteriorates, a contract outlines the previously agreed upon steps required for dissolving the relationship without punitive measures.   

Now, doesn’t that sound better than dealing with the chaos that can erupt when a handshake deal falls apart? Stick with a contractual agreement — it can eliminate a lot of hassles.

(Note: I’m not a lawyer and this isn’t legal advice in any way, shape or form. If you’re looking for a lawyer or a contract, I recommend USLegalForms.

Andrea says:

You’ve been lucky. I’m glad, though. I’ve seen situations where the person who did the contract quit, the sole proprietor doing the deal died, the company just didn’t feel like paying and so on. It’s a lot easier to settle things with a contract. And it’s very hard to see whether there’s a difference in the balance of power — asymmetrical information.

A contract is necessary when there is an imbalance of power. I only require contracts from clients that are bigger than me and would be able to hide behind their legal departments. With equals, such as other freelancers, I have never found it necessary to sign a contract. Each of know that the other party could ruin our reputation, so it’s an equal relationship.