Business Law Basics >> Each section contains key Action Items located within the downloadable Action Guide >> Click to Download Action Guide.
4.1 Is a contract valid if it’s not in writing?
Generally, yes. A contract does not need to be in writing to be valid. But there’s an important reason you want your agreements in writing: memories are fallible.
It’s also a lot easier to prove that you’re entitled to get paid when you have the agreement in writing. Otherwise you’re left with a “he said/she said” squabble in court.
If your word is your bond, you won’t have any trouble putting that word in writing. Nor will the other person. It’s a good litmus test for you, too – if someone refuses to sign a written agreement on principle, you may want to think twice about doing business with them altogether.
4.2 Can you download and use contracts you find on the Internet?
Yes, you can download and use a contract you find (or purchase) on the Internet. But the fact that you can, doesn’t mean it is sound or smart business practice.
Look at the agreement downloaded from the Internet (see end of notes). At first glance, it looks pretty comprehensive . . . but it actually contains huge gaping holes. Are you clear about what you’re providing – or what you can expect to receive in Section 1? What about payment terms? Especially late payment terms? How will you address that?
As we’ll discuss in Lesson 5.0, there’s another gaping hole in the agreement’s provisions on confidentiality. It says that information will be kept confidential, but what are the penalties if it’s not?
It’s so important to make sure a local attorney who knows your business reviews your agreements. Otherwise, you could be leaving yourself very much exposed.
4.3 What should you look for in office leases and personal guaranties?
Your lease is often your company’s largest single monthly expense – after employee salaries. Ask yourself the following questions:
- What kind of space do you really need?
- How long do you need it for?
- Is the landlord requiring a personal guaranty?
- How much is the rent . . . really? What are the additional charges?
- What else are you responsible for?
4.4 What kinds of terms could you include in your vendor contracts?
The terms you might consider putting in your vendor contracts are in many ways a mirror image of what you would put in your client contracts – it’s just that you’re on the opposite side of the table.
As we discussed in Section 2.4 on business partners you have the “3 M’s” again.
- Management: Who’s doing what? Are there benchmarks? Are there deadlines? What are they providing? How many revisions are you entitled to?
- Money: What are you paying them? Are there milestones where you need to make these payments?
- Moving on. Is it an ongoing contract that you want to cancel? If you’re not happy with the quality of the service or product that the vendor is providing, what are the policy and procedures for terminating the contact or getting your money back?
4.5 What kinds of terms could you include in your client contracts?
Now let’s flip it around – you’re providing the product or service. You have the “3 M’s” again.
- Management: Be very clear about what you’re providing to your client. Are there limits on the amount of time or product that you’re prepared to provide for the price you’re being paid?
- Money: What are you charging? When do you need to get paid? Remember that a late payer adversely affects your cash flow, so you want to keep customers on a tight leash if you’re not getting paid up front. Will you charge late fees or penalties for late payment?
- Moving on: What are the circumstances that will allow you to terminate the contract? Like not making a milestone payment. Would you want to continue working? If you have something like that in mind, make sure your client or customer knows it – put it in the agreement.
ACTION ITEMS: Complete the Action Items in your Action Guide.
START by researching the Internet and printing a couple of the available contracts. DO NOT use these, but review them. Can you download them so you can modify them to your needs?
CONSULT a lawyer experienced in your type of business to review these contracts or, better yet, to draft one for you. The investment of money here may be much less than that of a lawsuit between you and a worker because of a contractual issue.
ENSURE that the “3 M’s” approach is used every time!