Written contracts are non-negotiable for online service providers.
Yes, oral contracts can be enforceable.
But remember when you woke up in a cold sweat at 2 am because you suddenly realized your brain totally blanked on that really important thing you swore there was no way you’d forget?
Yeah. That right there is why you need written contracts.
No one running their own online service business has the extra memory space to store something that important and expect to have perfect recall when you need it later.
**Real quick before we jump in:
Everything I share is legal education and information. It’s not business, financial, or legal advice, and it doesn’t create an attorney-client relationship between us.*
No contract, no problem?
If you sell physical goods, you can turn back now. This article’s not for you.
Because, while you need a contract for the sale of physical goods, the Uniform Commercial Code (UCC) automatically steps in if there’s a disagreement.
Back in 1951, lawmakers recognized that sometimes, when two parties make a deal over a product, they leave out a term or two.
So the UCC steps up and fills in the blanks for them, rather than voiding the entire contract.
Unfortunately, things aren’t so cut-and-dried for service contracts.
Because services have a lot more nuance than the UCC can cover.
So, if you choose to skip the written contract as an online service provider, you’ll be at the mercy of common law should an issue arise.
Common law is otherwise known as case law – unwritten laws based on legal precedents set by the courts.
Suffice it to say, you’ll be a lot more protected if you’ve got a written contract in place.
The risks you run
Is it really that big of a deal to roll the dice with an oral agreement and skip the written contract?
It honestly depends on how much of a risk-taker you are.
Without that written contract, you may be facing risks like:
-Clients skipping out on their payments
-Difficulty enforcing the terms of your agreement
-Potential loss of intellectual property rights
-And in some cases, litigation
*Not even close to an exhaustive list, but you get the idea.
Plus, it’s really hard to set those (much-needed) boundaries with your clients, and honestly…
It doesn’t exactly scream “premium service provider” if you don’t get them to sign that contract.
Start with the basics
Ignorance may be bliss, but it’s definitely not a legal defense.
And by now, I’ve stolen any ignorance you may have had about verbal contracts being “good enough.”
So let’s get you set up with the basic knowledge you need to start using legal contracts in your online service business.
Here are a few things you need to know:
Contracts are governed by state law.
You definitely want to include a clause that clearly outlines which state laws will apply should a dispute arise.
You should hold off until your contract is signed.
Just because your contract is out there – doesn’t mean it’s legit. You should wait to start working until it’s signed (and remember that contract negotiations are common and normal).
And make sure both parties sign!
Speaking of signing agreements, make sure you sign your own contract, too. It requires both signatures to be valid.
Sign as your entity to maintain limited liability.
If you’ve formed a business entity that affords you limited liability (an LLC or corporation), make sure you sign as that entity.
Use contracts for every important business relationship.
You should have a contract for every client, vendor, independent contractor, and employee.
Which may sound like a lot of different things, right?
But it totally depends on the complexity of your business.
Because there are at least 6 contracts you should have in place to run a legit online service business…
6 contracts to consider
When it comes down to it, a contract is a set of promises.
One person promises to do something in exchange for something else from another person.
And you want to make sure you’re keeping track of those promises.
Here are 6 contracts to consider so you can keep those promises (and hold the other parties accountable to them, too):
- Client Agreement
Starting with the most obvious – this agreement is the backbone of your relationship as a coach, consultant, or any other kind of online service provider (from VAs to graphic designers).
- Independent Contractor Agreement
If you hire another contractor – NOT an employee – you need an independent contractor agreement in place.
Pro Tip: most contractors will want you to sign their agreement. And that’s totally fine! Just remember that you’re allowed to negotiate and ask for changes as needed.
- Nondisclosure Agreement (NDA)
This one is essentially a promise to keep secret things secret. NDAs are contractor-friendly confidentially agreements that any good contractor will be happy to sign.
Collecting any personal information about clients? Of course, you are – because “personal information” covers first and last names, phone numbers, email addresses, date of birth, IP addresses, and a whole lot more.
- Terms and Conditions for your website
Got a website? Then you need terms and conditions (aka ground rules) for things like how your content can be used, limitations of liability, third-party and affiliate links, etc.
Cross your t’s and dot your i’s
The bottom line is this: you’re not protected as an online business owner until you use written contracts to cover all your important business relationships.
Grab the right legal bundle for your industry in The Legal Shop.
(So you can stop stressing about what you forgot at 2 am.)
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