Open Thread: Do You Use Contracts?
Posted September 15, 2009 in Business, Open Thread
There’s a well known saying in the freelance and business world. You’ve heard it before, I’ve heard it before, and we’ve all probably ignored it on many occasions. The saying is this: you should always use a contract.
Despite seeming like such simple advice, it is often very difficult to put into practice. Heck, there are even times when it seems like it shouldn’t be put into practice. You shouldn’t have to make your favorite uncle sign a contract, right? Or should you?
If you have decided to use contracts on a regular basis with clients, there are even more obstacles to deal with. Creating a contract for your company, using it with your clients, changing or defending various paragraphs, etc… But despite the effort, the consequences of not using a contract could be far, far worse.
With all of these questions, and with only one person to handle everything, it’s clear that contracts are a difficult subject for freelancers. In this open thread I want to help turn that around, and get some of these things cleared up. If you’re new to freelancing, ask any of your contract related questions in the comments. If you’ve been freelancing for a while, try to answer the following three questions:
- Do you use contracts in your business? Why, or why not?
- In what situations do you use contracts, and what types do you use?
- How did you create or acquire your contracts?
Image by filippo
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About the author: Mason Hipp is a designer, entrepreneur, and writer. He is co-author of the Book The Unlimited Freelancer, and has just recently launched a collection of premium graphic resources for web designers called MediaLoot. Follow him on twitter @MasonHipp
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45 Comments
Chet
September 15th, 2009 at 10:36 am1. I sometimes use contracts. It depends on my level of comfort and scale of the project.
2. I use contracts on jobs that will take more than 1-2 weeks generally, or with new clients.
3. I usually go to http://docstoc.com and work from there.
Luke Jones
September 15th, 2009 at 10:48 am1. I _do_ use contracts in my business, but to be honest I’ve only just started in this fiscal year. Last year (my first year as a freelancer) was a test more than anything, so the clients I got then were personal and not very serious. Now that I’m becoming a serious freelancer looking for larger clients, they’ve became necessary.
2. I only use contracts on larger jobs that are worth more money. It would be unreasonable of me to ask a client to sign a contract and pay a deposit for a job that is £50.00, but if the job is £1000.00, it is necessary.
3. I wrote my own contract using guidelines and various templates, I’ve also had a solicitor read through and edit the contract to make it as watertight as possible. Though we all know that the smallest change will invalidate a contract anyway.
iFreelancer iPhone
September 15th, 2009 at 10:51 am#1, Do you use contracts in your business? Why, or why not?
Some case I will it, why? Deal with new customer.
In what situations do you use contracts, and what types do you use?
Work with new customer, I always create a contact.
Or sometime some company need we use contract.
We use a PDF and scan it.
How did you create or acquire your contracts?
Create from scratch, but most time just copy old one and change name and terms.
Kristina
September 15th, 2009 at 10:53 amI typically use contracts for new clients unless I’m really comfortable with them, they pay me up front, or it is a tiny job (if I’m designing a contact form only, for example) then I may skip the contract. I think I downloaded a free contract off the internet and customized it. I honestly don’t remember as it has been a couple years.
bogdan pop
September 15th, 2009 at 10:58 amI use contracts on all projects which have a value higher than 50$. Saves a lot of stress with the cost of a few minutes. As an added bonus, all contracts are designed to suit the brand, so the client gets familiarized very fast with it.
Kathryn Barlow
September 15th, 2009 at 11:32 amI always use a contract, with very few exceptions; such as ongoing site maintenance for a few clients that I’ve been working with for a couple of years, but these are generally very small invoices.
More than protecting yourself, contracts prove to your clients that you are serious about the work at hand and that you are a professional and you expect them to be professional too.
Jennifer Marin
September 15th, 2009 at 11:47 amI always use a contract for new clients for a lot of the same reasons mentioned above. Not only does a contract help clients take you more seriously, but it also ensures that there is no miscommunication; both parties are on the same page. It’s also a great way to stay organized.
I’ve built my contract based on others I’ve seen (AIGA has a good one) and copied and pasted to suit my business. I send a PDF that also includes a summary of the project.
Axelle
September 15th, 2009 at 11:59 amI use contract for long term projects (3-12 months). A friend of mine who is also a consultant gave me her template then I’ll ask another firend of mine who is a lawyer to check it.
For short projects (1 week – 3 months) here in Italy I use the “letter of mission”, the proposal signed by the client.
For usual clients on short term project, I ask them to send me an email saying that they are OK with the price and terms with proposal.
I don’t work anymore without a track of the commitment of the client. I agree with Kathryn Barlow, I think that this is a professional way of working and make your client see you as a professional.
Ricky
September 15th, 2009 at 12:19 pmI never use contracts (I do have one but never use it), even for 30k jobs. I’ve been freelancing for over 10 years and never found it necessary. I also don’t request any upfront payment.
Instead I bill incrementally for small amounts (typically from $500 to $1000 depending on the client) throughout the development period with terms strictly 14 days. If payment is late, work on the project stops and I focus on other clients who are paying their bills on time.
I don’t let clients run up a large debt and I don’t want a large up-front payment. I want clients to get use to the small incremental system from the get go.
It’s also important to look for the early warning signs, for potentially bad clients, and get out before they owe you money. I prefer to work directly with clients, rather than studios.
Also I absolutely love and adore scope creep, it pays my bills, since I don’t accept fixed bid quotes.
Troy Peterson
September 15th, 2009 at 12:29 pmI typically don’t use a “contract”… but, i do have a gerneral set of terms that are included on all my estimates.
Since I use Freshbooks, I have wording in there that if an estimate is accepted, they’re also accepting the terms included.
I have signed a few Client provided contracts for larger jobs, but they’re mostly standard NDA and liability things.
Toks Ogun
September 15th, 2009 at 12:40 pmI definitely use contracts to set a tone of professionalism. It draws a line that this is business and I expect to be paid on time. It doesn’t have to be anything fancy even if it’s just a page. Just the fact that it’s there works.
Victoria Dow
September 15th, 2009 at 12:44 pmAs director of a non-profit that uses contractors, I feel a good contact is a must. It protects both of us and makes clear exactly what is expected from the outset. The scope of work is defined, hours, cost, responsibilities of both parties, etc.can all be set in the contract. It keeps surprises to a minimum and I think actually eases communication between the contractor and organization.
Buddy
September 15th, 2009 at 12:51 pmI ALWAYS use contracts, especially with family and friends – no exceptions.
Nikhil
September 15th, 2009 at 1:16 pmI have not use contract yet.
Hey can anybody tell what is the main points to include in the contract?
how should it be formatted? So that it will not look like amateur?
Thanks
Nikhil
mayhemstudios
September 15th, 2009 at 1:27 pm1. Do you use contracts in your business? Why, or why not?
Yes, a must. There are many talented and smart designers out there but they aren’t business savvy, don’t use contracts. Without a contract, will get burned eventually. That is one reason to have a contract, to cover your ass.
A contract also helps with what is to be expected from both parties, what’s to be delivered; product and/or service, so there will be no miscommunication. It helps to protect both the designer and client. Finally, make sure to get a deposit before starting any project, 25%-50%. If the client is unwilling to leave a deposit, they’re not serious about working with you.
2. In what situations do you use contracts, and what types do you use?
I use a general contract on every project small or large, but depends if it’s for print or web work. On smaller projects or if it’s a client I work with all the time. I use a term and conditions for them sign off on.
3. How did you create or acquire your contracts?
I used AIGA and other designer friends contracts as a references. I modified and added questions to fit my needs. Here is a sample of my contract, http://bit.ly/cTNOA. Feel free to use it.
- Cal
Accrete Web Solutions
September 15th, 2009 at 2:14 pm“Do you use contracts in your business? Why, or why not?”
Yes use contracts (personal and business). A clearly written contract defines expectations of both parties and defines the limits of the project.
“In what situations do you use contracts, and what types do you use?”
Always use a contract whether for your business or for purchasing a service for your personal life. As I said above, it defines the boundaries of the contract. Verbal discussions not clarified/included in the contract are not enforceable.
Use stipulated sum contracts mostly. People want a definate answer of what the job is going to cost.
“How did you create or acquire your contracts?”
Developed my own after reviewing what the normal contract includes for my industry.
Lexi Rodrigo
September 15th, 2009 at 3:40 pmOh I definitely use contracts – just a simple terms of agreement my clients concur with thru Email. Emails are legally binding so I’m not very formal about it.
Maxime Alexandre Trudel
September 15th, 2009 at 4:43 pmI use contract with any client. When I get the job and it come serious…
I use the letter head of my compagny and I started from the scratch. My lawyer did me a template I juste change the term and the name on it depending of the client itself. I did 2 copy of it that I send to the client one for me and one for him.
I think it is more serious or more professionnal to use contract.
Rachel Toy
September 15th, 2009 at 5:13 pmI ALWAYS use contracts, ever since my first ever difficult client who kept moving the goalposts, then not wanting to pay for all the extra work he wanted. He also expected me to work for him 8 hours a day, and as he was so demanding, left me little time for my other developing clients. Ever since then I have used a contract (or terms and conditions) to set clear guidelines so everyone knows what to expect.
I also think if a client is prepared to sign a contract at the beginning and pay a deposit, they are more likely to be genuine and it helps you whittle out the timewasters. I downloaded a template contract from the internet and got a business advisor to look over it, customising it for my business.
Apart from the reasons above it helps you to look more professional, and if you want Professional Indemnity insurance, it is a must. They won’t even look at you otherwise as most claims will be based on what your contract was with the client.
Chere
September 15th, 2009 at 5:46 pmGreat questions!
1. Do you use contracts in your business? Why, or why not?
2. In what situations do you use contracts, and what types do you use?
I do use a contract. At the very least a MOU or TOS for ANY project. I use these because they define the expectations or state exactly what services will be done, for how much, by whom and when. Getting these details in writing can eliminate a great deal of headaches later. It’s better to say, “please see our contract” than to say, “but don’t you remember! We talked out it three months ago!”
3. How did you create or acquire your contracts?
I had a lawyer create one. But I have several TOSs that I use for clients who have been with me for a long time.
Heather Villa, CMA, MBA, MSM
September 15th, 2009 at 8:49 pmI use a combination of contracts, statements of work, estimate approvals and engagement letters depending on the job, the client, the duration, the amount and location of the client.
Typically if the client is outside of my country (the US) a contract will do nothing for me (very difficult to pursue collections etc. on foreign countries or individuals) so working with estimate approvals and milestone payments work well.
For ongoing work (i.e. steady services) with US based clients, contracts are done without fail.
For coaching clients or one time projects, I typically find that an engagement letter or statement of work’s work out best.
Michael Krapf
September 15th, 2009 at 10:15 pmYes, always use a contract…however, sometimes the contract is edited by the client prior to signing.
The first time this happened I was caught off guard and realized that I didn’t know the document like I should.
One contract for Web, one for Logo’s
Through experience, the contracts have morphed over time, but the original was drafted by an attorney.l
Hameedullah Khan
September 16th, 2009 at 12:17 am1 and 2. Yes, I try to do my best to use contracts. In the beginning of my career I used to avoid them and then after experience couple of runaway clients I figured out that I have to use contracts and some% of upfront payment.
3. I downloaded a templated from the Internet and modified it.
@Ricky
I like your approach and this is more straight forward then the contract based and upfront payment approach. Gotta try it with the new clients. Thanks for sharing.
P4blo
September 16th, 2009 at 3:24 amNo, I don´t use contracts, but… I was thinking in using “quotes” ( i don´t know if that´s the word) as if they were contracts, making the client to sign they are agree with the price and the project they requested. So it can be a document to prove the client was agree to work with me and pay the price.
Sorry for my english
tnx
Dape
September 16th, 2009 at 4:40 amIt has to be a must, but contracts can be worded to include hidden details, always read the small print there can always be something you have overlooked. This might be controversial but I do believe that creative artist/designers think differently to business promoters. The artist wants to show, where-as the business promoter wants to exploit and quite often to the detriment of the artist.
James Costa
September 16th, 2009 at 8:38 amI remember hearing this all the time and I thought “you know what, I’m working with clients right now that are generally people who have been referred to me or know me personally… they wouldn’t rip me off”. Turns out that based on my age and the fact that I hadn’t yet gotten any formal education in the field, they thought that the little money they paid me covered everything they wanted, and everything they would ask in the following months.
This ended up in having to go back to previous conversations to see what was told of me that was needed, etc etc. Because of the fact that most of these deciding conversations were made in person, there wasn’t much of an e-mail paper trail to follow and I ended up actually losing money on clients that had been paying me sub-par to begin with. Sadly this ended a lot of good friendships and networking opportunities, but thinking back I don’t regret my decisions to drop clients on that principle. Still, you have to learn from those experiences and I definitely have put together a template contract and proposal for all clients.
When I start with a client and talk to them, I immediately start filling out the proposal and when I get a chance I sit down and sift through the contract to see what clauses apply or may need to be changed. I always use contracts now, and my clients respect me for it and realize right away that as a freelancer I am still a professional and have rights that need to be respected. The contracts I’ve made have clauses taken from other contracts I’ve found online, especially those from AIGA. For the most part, though, I’ve simplified their wordings and shortened them to only have clauses that apply to that specific client.
BlackWasp
September 16th, 2009 at 8:47 amI think you should use a contract for all work, no matter what the size. For larger projects a contract is a must. Even for smaller projects, a written agreement is necessary to protect both parties. If you are quoting £100 for some work it may seem like overkill to create a full-blown contract but a standard set of T’s & C’s on the back of your quotation gives you some protection.
James Costa
September 16th, 2009 at 9:08 am@Michael Krapf: When sending the resume to clients, send as a PDF and if they have any problems tell them to tell you prior to changing, and always look over it before you move on. There are ways to make PDF –> DOC now, but it completely changes your look so make sure you lock changes and stuff.
John Soares
September 16th, 2009 at 9:43 amI write supplements and ancillaries for college textbooks, and the textbook publishers always create a contract that we both sign.
Chris
September 16th, 2009 at 9:44 amI’ve thought about this before. I guess my main concern would be how to make one up. I’m going to take some of the suggestions here into consideration to come up with my own contract. I agree it makes you look much more professional too.
Jeremy
September 16th, 2009 at 9:45 amI absolutely use a contract. When I first started freelancing I had a very loose, weak, partial, almost non-existant contract. I learned very quickly that the more I put into the contract ahead of time the fewer the headaches in the long run. Not to mention what I take out of a project with a good contract, and I am not simply referring to money.
For me a contract is a must for all new clients. Even if it’s a small project, my intention is that I will impress them enough to keep them coming back in the future and a good contract up front sets the tone for our work together in the future. When it comes clients who require ongoing maintnenance and work, I set up an additional contract to better establish our working relationship and set guidelines for anything from payment terms to how a work request should be submitted. In my experience the less you leave open to interpretation the better. (That’s not to say I don’t leave the terms open for discussion before we finalize the agreement.)
The contract I use constantly evolves and has been pieced together from various sources both online and off. Just when you think you have covered it all something new pops up, so it never hurts to put your contract under review.
Connie Mayse
September 16th, 2009 at 10:17 amI have just started freelancing this summer. My previous position was as a consultant with a major consultancy, so I used my knowledge of their contract language to develop my own contract. I have to say, it was such a thrill to received that first signed contract back from the client.
I am working a second contract job and am working on a verbal agreement rather than a contract. While this is a bigger job with more hours, I work directly with the account manager on professional association work, so if either of us act unethically, we will likely suffer in our professional standing.
After this assignment, though,, I plan to use contracts regularly.
James Costa
September 16th, 2009 at 10:23 am@Connie Mayse: It’s never too late to put a contract in. You don’t want to be the person who loses professionalism and status, especially since you’re just starting out. I agree that when you’re working with the person who is paying you directly it’s easy to say nothing bad will happen, but even still it’s better to be safe than sorry!
Bill DiBenedetto
September 16th, 2009 at 12:05 pmIf I were a web designer I would use contracts all the time, no exceptions.
As a freelance writer, the contracting question is more informal for me. Large corporations or government and quasi-government agencies usually insist on contracts, especially for longer-term projects, and responding to RFPs automatically leads to a contract if the bid is won. For other writing gigs I usually formalize rates and services in an email to the client after we’ve talked. So there is something in writing or ‘on the record’ that qualifies as an agreement of sorts, but it’s not a formal contract.
Wayne Key
September 16th, 2009 at 1:19 pmI have never yet used a contract, but I know it is past time to do so. Does anyone have any suggestions on where to go to find free contracts that cover the basics?
Thanks for an excellent post and all the knowledgeable comments!
James Costa
September 16th, 2009 at 1:20 pm@Wayne Key: Check out AIGA’s… It’s very simple and easy to mod. :)
http://www.aiga.org/content.cfm/standard-agreement
Michael Vella
September 17th, 2009 at 4:16 ami do not use a contract but include my Standard Terms & Conditions, when I send out quotes. Once a quote is accepted, I send a letter thanking the customer and outlining exactly what services I will be providing, as well as payment terms and expected time line. Again, I attach my Standard Terms and Conditions.
The client has no excuse, if they do not read the Standard terms and Conditions. After all, I was upfront with them by giving it to them when I was only under consideration as a potential supplier.
I use my terms and conditions as proof that I am professional in the way I do business
Nicole Foster
September 17th, 2009 at 6:51 amI too do not have a contract, but I have a terms of service page that I attach in my emails, and have available on my website. The good part is, the clients see if immediately because above my contact form it says: “By contacting, or directly emailing me to inquire my website design services you agree to the Terms of Service.” So, it is the responsibility of the client to take a look at the Terms of Service because I provide on my website, and in the first email.
I would say a Terms of Service page can almost substitute a contract, but I would advise having one anyways.
Guillermo Guerini
September 17th, 2009 at 9:37 amI don’t have a formal contract, but I have some documents that describe all the job and the money involved. I never really had problems but the more I think about it, the more I want to become a bit more professional and maybe start to use contracts. If someone has a nice template, it would be very useful. My emails is guillermo [at] gguerini.com
Thanks
Kevin
September 17th, 2009 at 9:22 pmContracts? Absolutely. There are very few reasons not to use one, since it outlines the agreement made between “Client” and “Developer” (in my case). Perhaps for some regular clients there can be a global agreement. I also use subcontractor agreements.
Some important items to agree and sign about (in my agreements) include the following:
* WHO each of you are. Name, address, phone, etc.
* ONE main contact. It’s impossible to take orders from a team without a leader…
* WHAT you’re providing. “Oh… you mean you want ME do do THAT too? Hmm…”
* TERMS of compensation. Fixed price or hourly? “No, this is not a fixed-price project. That was just an estimate of time…”
* WHEN you’ll get paid. NET30? NET15? Immediately? “Our company pays invoices on a quarterly basis…”
* SCOPE! If you’ve estimated one thing, and it changes… what have you agreed to do about that? I offer three days to respond, and then the client will be informed if the agreement should change, or if it’s not possible. “I know you’re done coding everything, but now we want a five-column website, not two… by Friday.”
* DELAYS… sometimes you get sick, or there’s an emergency. Does this mean the client doesn’t have to pay you if it’s late because of that? Do they pay a portion either way?
* OWNERSHIP. Does the client own everything you develop or design? Do they get source files? Is it clear that there’s open-source software being used, and they can’t “own” that? Can you post this on your website as an example of your work?
* LIABILITY! If they engage in a lawsuit because of something you designed or developed, and they didn’t catch it during the review process, are you liable? NO! Or, are you? Are you protected under an LLC, or will you lose your house because of it..
Ugh. It has happened before if you’re a sole proprietor without business covering…
* LEGAL stuff… what jurisdiction would conflict resolution be in? In your home town, or their part of the country?
* EMPLOYMENT… Are you an independent contractor? Can they claim you as an employee? Do they have your W4 or 1099? Will this contract mess up your taxes?
Simply be reasonable. Long contracts may dissuade potential clients. If you’re providing the service, don’t sign THEIR contract. It’s written in THEIR favor. Get your own, and have a LAWYER review it. It costs only a few hundred dollars, and it’s worth it.
Cyndi Smith
September 18th, 2009 at 4:49 amI use contracts even in the bidding process (with options to approve, approve with additions or changes, reject pending changes or additions, or reject). It makes the final contract much easier, AND you have a great list of everything you want to accomplish for the person. It also helps show the value of the service you’re providing (especially web development). Did I mention that I HATE BIDDING? (It can take so much out of you!) Maybe there’s an easier way?
:) Cyndi
Nic loves languages
September 19th, 2009 at 8:23 pmAnother who knows he should but doesn’t…
Marketing and Management
March 10th, 2010 at 5:31 amRegular mutual understanding of the needs and desires of the clients project will have to taken for the consideration before entering into the contract.After once contract signed the valuable process of the rules and regulations will be followed correctly.keep sharing.
Perry Rose
June 1st, 2010 at 11:57 pmNo, I don’t use them.
1. I get my fee upfront.
2. Many are turned off by that word.
We come to an understanding via an e-mail.
Later, if there is a problem, I show him the e-mail. If it becomes more of a problem, I drop him.
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