Four Things Contracts Are That Lawyers Won't Tell You!

Contracts are a core piece of the legal triad. This triad works to limit liability and protect the entrepreneur Contracts are an essential pieces of this – but it’s not as simple as just selecting a contract and moving on.

As an experienced entrepreneur/lawyer who works every day on contracts, copyright and other legal matters for photographers internationally – I’ve boiled down the 4 things photography contracts are that lawyers won’t tell you.

Little spoiler: It’s because even the lawyers don’t see these things.

This is a word-for-word transcript, so it's not perfect!

Reducing confusion, setting expectations and protecting yourself, that's the name of the game when it comes to using contracts in your business. I want to walk you through some of the top myths, misconceptions, and let you know what contracts really are and how to effectively use them. Even though I'm an intellectual property attorney, I do not believe using a contract to beat your consumer over the head with. It is there for both of your protection, it's there for so many things. Let's go ahead and dig right in.

                                    My name is Rachel Brenke. I am a business strategist, an intellectual property attorney for entrepreneurs, and I am a huge proponent of the use of contracts in business. I say this as an entrepreneur, not just as an attorney, because I know that all of you want to make sure that your transactions with your consumers are going to go off without a hitch. You're going to be happy, they're going to be happy. They get served, you get paid. All as well that ends well, right? We want that, that is the goal in business, and then also live in the real life that we want to have. But in order to get there, we have to work to eliminate problems and use tools readily available at our fingertips. Well, contracts are a key one.

                                    I'm using contracts as a general term here. I'm going to run through a list of the top ones that I see that many entrepreneurs need but don't use, especially when they're doing business with family and friends, which is a huge no-no. But you all are smart. You're watching this video for a reason, you are gaining this information. You know how important it is to set yourself up for success. I wish that when entrepreneurs got into business, they were required to learn about legal liability, liability protection tools. This is one of those of the legal triad. I have another episode on this, so I would love for you to go and check that out, but if you have not, that is okay. Stick with me here, you can listen to that later.

                                    Very basically, the contract is an agreement between two people or two entities. In fact, it can be even more, but we're going to stick with the two-person situation here because that is cleanest and easiest for our example. You, as the business owner, the entrepreneur, you're providing either a product or service and your consumer is buying into that product or service and paying you for it. There's a bargain for exchange, you're both in the capacity to be able to enter into the transaction, and that fundamentally is a contract. It can be verbal, it can be written. When I use the term contract throughout this episode, I really am referring and recommending the use of written contracts because you cannot dispute when everything's in writing. Everybody is going to feel more confident. When I say everybody, I'm talking about you as the entrepreneur and the consumer that is paying for the product or service.

                                    Buyer's confidence is built up when contracts are used. Contracts presented by an entrepreneur in a good way, to protect both parties, to outline obligations and responsibilities, to set the expectations, not only is going to build the buyer's confidence, it's going to build your confidence as an entrepreneur and they're going to perceive you even more professional. They're going to feel more comfortable with you and less likely to quibble over price, or if there's a small issue, they're already in the field comforted because there was no guessing at all to the transaction.

                                    Now, in this case, I'm typically referring to a services or purchase agreement. You're selling a product, it could be online, it could be physical, or if you're a service-based provider, you're providing a service in exchange for something, typically going to be money. Please, please get those kind of stuff in writing. There are so many things that we want to do outside of just this expectation setting, outside of setting up the legal relationship, outside of being able to provide customer service, which I'm going to dig into all these three shortly.

                                    Contracts really should be a couple of things. They should be lawyer drafted, they should definitely be drafted with the involvement of you, the entrepreneur or the head of your business, and they should be updated frequently. Also, send them electronically. I don't need a carrier pigeon or having to hunt down a printer ink in order to print it off, sign it, scan it and send it back. That's just the whole mechanical way of using them, let's dig into the way that they actually work for us in our business.

                                    Well, first of all and obviously, contracts are typically going to be legal protection tools for us. They create the legal relationship between you and the customer. Depending on what type of document it is, we're going to stick with the services agreement example here. Legal protection, what does that even mean? Well, I already mentioned, contracts can be formed orally or they can just be half written on a piece of paper. When they are a solid lawyer-drafted document, they're going to provide legal protection if they include specific things. We're looking at very specific things in the contract that are going to protect you and also set the boundaries with our client. We're looking at things like where is a dispute going to be resolved? How is it going to be resolved? Are there attorney's fees on the table, because if it's not in contract or put in the statute, you're not going to get your attorney's fees, even if you were in the right, entrepreneur. Bet you didn't know that one. There is a plethora of stuff that we need to have in there that's going to provide legal protection.

                                    Secondly, contracts are expectation-setting tools. This is a good crossover with legal protection, because it's also going to set it up so that their obligations are outlined in case either of you breach the contract, but it's also putting it into one place for your consumer. I get it, you may have a fancy, awesome website, you might have 500 downloads that you give them, but how efficient and wonderful is it when the person that you're getting into bed with, into contract with, they only have to go to one place for it? They don't have to go on a scavenger hunt, 500 places, because that is when miscommunications start popping up. That's when buyer's confidence starts to erode.

                                    The more questions that a consumer has to ask, the less likely they're going to buy into and the less happier they're going to be in the end. Think of the whole straw breaking the camel's back. You could have a bunch of little things that happen over time, and finally, the consumer is just not happy. It could be little things that could be mitigated or remedied by the use of a contract, where you're putting all the expectations right there.

                                    Third, we can also utilize it so that contracts are a little bit of a no man for us, because let's be real, as entrepreneurs, especially in the beginning, we are afraid of rejection. We're afraid of upholding our contract to our consumers because we don't want them to think badly of us, talk bad about us or decide not to buy into us. I love looking at contracts not just for legal protection, but for setting the expectations, but also so it can be a no man for me. It can give me a little bit of a backbone.

                                    Let me give you an example. The movie Liar, Liar with Jim Carrey, he's speeding down the street cop, pulls him over and asks, "Do you know why I pulled you over?" I mean, we've all been there, right? He tries to say no and he goes, "No, yes," because he can't lie. That's what happens with so many entrepreneurs when the consumer is pushing and pushing and pushing the boundaries, they're wanting more than the contract has provided or wanting more than they have paid for and you get to a point and you're just like, "Oh man, for customer service, I can give a little or give nothing." You're just like, "Oh, how do I tell them no?" Let the contract tell them no for you. It takes a little bit of the burden off of you, it gives you a little bit of backbone and you can say, "Well, customer, per the contract, these were the terms."

                                    Obviously, you are the business owner. Another thing that contracts are, a customer service tool. You can utilize it, set the bar with your contracts, but then you can always not necessarily enforce it. One of the common things that I see, especially in service-based businesses that do payment plans, put the payment plan in the agreement, then put also what a late fee would be. This is giving that structure and the boundaries and the obligations of what the consumer or your client is going to have to be within. But guess what? You can always, if something happens, COVID happens, life happens, if that client comes to you and says, "You know, Jill, I know I was supposed to pay last week. I'm so sorry. Can I have another week?" you can take the step as the business owner to say, "Well, the contract does require a late fee, but I'm not worried about it." That's how we can use contracts to set the bar, set the expectations, set the legal protection, but also provide customer service.

                                    But let's look at that example in the inverse. If you don't have agreement at all, or it's completely silent to this type of stuff, and you have a client that is dragging you on and on and on and on and on and they're not paying you, what are you going to do about it? Well, hopefully you have a good contract so you could pursue it if you wanted it to, but looking very specifically at that late payment amount, all that administrative time that you're going into pursuing it is not being compensated for. You cannot just arbitrarily add on a late fee after the fact, it has to be agreed to in the contract. That's just one way that you can see how you can use for customer service. Set the bar, but then you can always go above and beyond or stick to it, completely up to you, but you cannot try to enforce things that are not in the contract before.

                                    Just a little quick recap on what contracts are, legal protection tool, creating the legal relationship, letting everyone know the rights and obligations of it, it's allowing for it to be a backbone for you, the no man for you, allowing you to also set the expectations so that everyone has all the information in one place, and lastly, a customer service tool for you if you wish to use it that way.

                                    Before I let y'all go, I want to give you a quick and dirty list of the top contracts that I see that a majority of entrepreneurs need to have in their business. If you're a service-based provider, it would be a services agreement, if you're selling physical product, you're looking at a sales type of agreement. Those are kind of interchangeable depending on the type of industry and what you're selling. If you're having things created for your business, content assets, visuals, all of that, I talked about in other videos so make sure you head over and watch that one too, but you want to make sure that you have either an intellectual property transfer document signed by the person or entity that is creating those assets for you so you can have it transferred to you, so you can own your brand, or if it's someone that's working for you, make sure they're signing intellectual property acknowledgement. That is also transferring all of the intellectual property rights to you so that you can own your brand.

                                    Now, if you're looking at trying to hire, we want to have things like a main agreement that's going to control and outline the relationship, whether it's an employee or an independent contractor. In addition to that, we want to look at having non-solicitations, non-competes if appropriate, confidentiality. Those can all work together in an employment or independent contractor hire package to help protect you, set expectations, and all those things that we just talked about.

                                    Of course, many of us have websites, so make sure that your websites are legit and you have website terms that are going to do a lot of what we just talked about, but also a privacy policy. This is the area that so many entrepreneurs are overlooking and I'm really enjoying seeing so many newsletter systems and CRMs are starting to require these because there are many states that are starting to enforce it as well. Privacy policies are going to outline to the consumer, to the website visitor, to the person that's buying into you or opting into your website, when they're giving you private information or if you're tracking them, like through scripts or Google Analytics and they're just visiting your website, how you're getting information, what information you're getting on them, and what you're going to do with that. A privacy policy is extremely important and it's definitely one that increases confidence because all of us are tired of our private information being sold, so have your privacy policy convey that for you.

                                    Hope you guys enjoyed this quick and dirty on contracts. Really, I bet many of you had no idea that contracts could have so many purposes. You probably just check the box to get one or really hadn't considered it before. I highly recommend that you really dig in and get these in place, because there are so many situations that are going to happen in your business. Even if you don't end up in court, I mean, God forbid if you do, you want to have the legal miscellany and all of that legal protection, but even if you don't end up in court, that's the goal of these, is to outline the expectations, have it there that you in your consumer can look to, to try and resolve an issue or even just prevent an issue on the front end.