Business Bites Epi 89: 3 Ways Not Having a Contract Can Cripple Your Business

3 Ways NOT Having a Contract Can Cripple Your Business

Episode 89 on the Business Bites Podcast

The Gist Of This Episode: Working with others can be great but can also be riddled with issues especially if you aren’t on the same page with each other.  Join Rachel as she teaches you why having a services contract in place can help prevent issues from happening and preserve your working relationship with others. 

 

What you will learn: 

  • What things can go wrong when collaborating with someone else
  • Examples of things to include in your contracts
  • How having a contract can save you time and money
  • Who is responsible for attorney’s fees should you end up in court
  • and more!

Expand To Read Episode Transcripts

Rachel: Good morning Business Biters. I am your host, Rachel Brenke. This episode we are going to be talking about very real situations that I see happening with you guys all the time. I think it’s wonderful that you’re going out there and hiring other businesses, your friends, your networks to help work with you on your business, create content, and just overall try to elevate everyone’s businesses. Here’s the problem with that. The situation that I’m going to be talking about today is something that I see all the time. I know you guys listen to the podcast and you hear me talk about the need for legal stuff and you may be half bought in, or maybe just a quarter, or you just simply listen and then go about your way and don’t do anything at all. I honestly hope that this situation that I’m going to bring to you today is going to convince you why it is so important for you guys to have contracts when you’re working with other people.

Because here’s the scene, this could be a million times over, so this is not just one direct client, this is a bunch that I see in situations that occur all the time. You see a friend. They’re able to offer you some sort of assistance in your business, whether they’re creating something for you or you guys are working together on a project and so it’s like a partnership type project collaboration, or you simply hire someone else to help facilitate the creation of something like videos or podcasts even. Right? But here’s the thing, you get to know each other and you like each other, and not like, like like each other, but you guys are amicable, you’re friendly, share a latte and avocado toast or whatever, and so everything seems fine. You guys will see it on my website, you hear me say it in the other podcasts, you never have an issue until you have an issue. And working with other people is bound to be riddled with issues. And sometimes it’s not necessarily because they intend it to go awry or you either, it just happens. That is life.

Now here’s the thing, you’re hiring this person to come in as a contractor, maybe it’s an individual that they have a whole team, and they’re helping you to create something for your business. You guys have heard in other episodes where I talk about like, How to Hire a Logo Designer is the title of the other episode that can walk through all of the key aspects of intellectual property. Well, we’re not going to talk about just that today, not just copyright stuff. I want to go through the top things that can go awry when you don’t have a services contract in between you and someone that you’re hiring. But the first thing that we do want to start with obviously is, the fact that intellectual property rights are not defined.

And by the way, anytime I cross reference any episodes here, you’re going to be able to find this over at Rachel Brenke, rachelbrenke.com is where I house the podcast. I also have the Business Bites podcast group on Facebook, so just make sure that you’re digging in, and you’re seeing the show notes, and other information. But in the show notes and transcript for the episode, we are going to have all of the episodes and resources and tools that I talked about linked over there. But this specific episode is going to be episode 89 at rachelbrenke.com/epi89, or you can go to rachelbrenke.com, or businessbitespodcast.com and it’s all going to take you to the same place.

All right. So let’s dig into this here. The first thing that if you guys don’t have a services contract that you want to, well, that you’re wanting to avoid. Right? You don’t want to have an issue later on, you didn’t ever have a contract, and all of a sudden there’s some sort of question as to who owns the intellectual property. And what do I mean by that? Well, let’s say that you’re recording a podcast, but then you’re hiring someone to edit it or you’re recording videos and it’s a production team with the processing and they’re going to process your videos for like YouTube, or IGTV, or Facebook or something like that. It could even be all the way through like hiring of a logo designer, like I talk about in the other episode, whoever it is, there is potential for there to be a collaboration.

And what I mean by that is there may be some sort of wondering, who own the intellectual property rights in a certain piece of work that’s been created. It could be owned by the person that you should have contracted, I mean we can’t say contractor, because there’s no contract. And so the question is, “Who owns that?” Well if I’m on the podcast and I’m giving that information and it’s my voice and it’s my knowledge and it’s my output of words, do I own the IP rights? Well, maybe, but what about the person that’s intentionally like changing the levels, putting some recordings in there, who’s adjusting the different things within the video? Well, they’re also contributing an element of intellectual property.

So the question is, Who owns the intellectual property rights in that piece of work, in that intellectual property, in that video, in that podcast that’s been created? With a services contract, that’s super easy to define. You’re going to have it signed over to you, the person who’s business that you’re probably utilizing it to promote. And when I say promote, it can be advertisement or can simply be content that you’re putting out there with an end game of people buying into your products, or service, or even it is a product, a video, or a podcast that you’re selling in order to materially benefit from. All right?

So the very first issue that we have here is that the intellectual property rights are not defined. And so if you are sitting there and going, “Oh man, I didn’t have a services contract with someone, what do I do now?” Well, we do have a copyright or IP rights transfer document over at rachelbrenke.com, or you guys can reach out to your local intellectual property attorney and get this sign. I’m going to tell you now though, and the issue that I’m trying to avoid here is, once something goes down, if there is something in the relationship that goes awry, it’s going to be hard to get someone to sign a document like this. But maybe you’re sitting pretty and going, “Well, we don’t have a problem yet, but we don’t have a contract services agreement.” We can at least still go and get the IP rights signed over to you. So the you’re able to manage the control of the use of that podcast, or that video, or whatever that piece of intellectual property is. Especially if it is in some form or fashion has you in it, you want to have brand and reputation control.

All right. So again, on that, the first thing is that if you don’t have a services contract, the IP rights are not defined. Or if you have a services contract, make sure you have a section that’s even defining who has the intellectual property rights in that product, or product that is being created. Because you don’t want to run into issues of other people owning it, and you’re not being able to manage it. You don’t want to run into issues where they’re using it inappropriately, being maybe cause they’re coauthors that they’re allowed to utilize it. So those are just some things to think about.

A little side note there, so all is not lost, and I’m not going to go too far down that path here, but let’s say you’re in that podcast or in that YouTube video, and you’ve created it with someone else, they’ve done the production pieces to it, you didn’t have a services contract, and that other party, once you have a problem, starts using those videos in some form or fashion. Well, first we got to see, right, whether you have any intellectual property rights. And you probably do, because you’re the person in the video or the podcast and you provided the content, but you also have a layer of publicity rights as well, so keep that in mind.

The distinction between the two, not that it necessarily is such a big deal for you guys, I’m making a decision here. Just may be something to throw around at cocktail hour at your next networking function. Copyright stuff is going to be at a federal level, and this publicity rights claims are going to be at a state level, and so that’s just a nice little strategic thing. You can decide if you ever have a problem when you go to talk to a lawyer, of where you’re going to resolve these issues.

So again, number one, not having a services agreement in place, IP rights are not defined, but if you’re sitting there and you’d really want to have everything signed over to you, which you should, to your business, go get a intellectual property rights transfer document from rachelbrenke.com. Number two issue, when you do not have a signing services contract agreement is that, if you have to enforce the agreement against somebody or you want to get out of the agreement because maybe they’d done something and so obviously you’re not going to end up fulfilling your end, you don’t have any control over the venue or jurisdiction. And what I mean by this is, these are the places and the state law that’s going to apply of where a dispute can be brought.

So for example, let’s say that you live in Florida and you’ve contracted with somebody out in California without a contract, and defining your venue and jurisdiction. And this is generally speaking, but if you… Which I didn’t do my disclaimer at the beginning of this podcast, again, this is all educational information, different circumstances are going to demand different legal analysis. Always reach out to your local attorney. I can do the federal copyright, trademark and that kind of stuff. So feel free to reach out through rachelbrenke.com, there’s a link directly over to my firm we can talk about, but the podcast itself is not legal advisement.

But back to this, this number two, if you don’t have a signed services agreement and when I mean, signed, fully executed, and having this included. Okay? So if you don’t have this included or you don’t have an agreement where it identifies the venue or jurisdiction that’s going to govern any dispute that arises, you live in Florida, the other party’s in California, that means that they could just file in California. Well, what’s that going to do to you? It’s going to require you to have to find a copyright… Or I’m sorry, a California attorney is going to have to require you to maybe come to California if you’re going to fight the dispute. And of course flipping it on his head, it can also benefit you in some ways in that if you have a problem and it’s not defined, you could put it all in Florida, and make it disproportionately disadvantaged to the California person. The only problem is then, you don’t know when the other person’s going to filing [inaudible 00:10:01]. When things start breaking down, you don’t want it to become a race to the courthouse.

And that’s kind of one of the things that I want to eliminate here. Not only it becoming a burden for you to have to end up going to another jurisdiction as to where that is inconvenient and costly for you, but also it takes away this whole air of if there’s no agreement or there’s no identification where it’s going to happen and things start falling apart and both sides have potential claims, you don’t want to be sitting here and not having any leverage. Right? If we had identified in the services agreement that all the videos, or all the podcasts that were created for you are going to be governed by Florida and dispute resolved in Florida, well then you’re not in such a rush because it’s probably going to make the California party pause a little bit, because it’s going to be burdensome for them to bring a case against you in Florida. Because why? Well because they have the burden then of finding Florida counsel, and the expenditure of all of that.

So these are the kinds of things guys, and why lawyers put this stuff in here. One of their major reasons why lawyer drafted contracts are the way to go, and not just contracts you write yourself. I have an episode also I’m going to link in the show notes at rachelbrenke.com/epi88, Why Not to Self Draft Your Contracts. And this is another thing, because look at this, not only is it managing if there’s going to be a dispute, because obviously there was one, that’s how we ended up here, but it will also eliminate some of this whole, “Let me rush to have to file so someone doesn’t file against me first,” type of feeling. And that starts to increase in costs for you, increasing stress for you. And it’s something that we can fairly reduce, not eliminate, but we can reduce by having this kind of section in the services agreement. All right?

So first was, IP rights are not defined. Second is, that you don’t have any control over where a dispute can be brought from you. Another thing I want to say here, we don’t go into contract expecting to have to do a dispute, but there is a reason that we have a wholly legal miscellaneous section at the end of… And I put them at the end, so I say at the end. It doesn’t necessarily mean it’s wrong if it’s at the top, it just is logical that these boiler plate type information and writings, go at the end of the agreement. And there’s, there’s valid reasons for it, as you can see here. And these are strategic things that if you’re actually going to be the spearhead, you’re going to be the CEO, you’re going to be the mastermind, and you’re going to be the head of your business, and you’re going to be in a proactive mood, and proactive approach to your business, to actually protecting it and taking it serious so other people take you serious, this is a section that you guys need to really get your head around.

Number three, also piggybacking upon the jurisdiction stuff in the little soapbox that I just stepped on, if a dispute has to be brought, again, we never go into business thinking we’re going to have a problem but we want to safeguard in case something does happen because it does, but either your services contract is silent on any attorney’s fees, or you don’t have a services agreement at all to award attorney’s fees.

Here’s the thing guys. There is this great misinformation out there that, if I take some of the court and I win, I automatically get all my attorney’s fees. No, wrong. And like I just wish I could scream that from the rooftops because what’s going to happen is, you’re going to end up then having to make the decision of, “Is it worth paying an attorney, and I’m not having any potential of attorney’s fees back? Just to either get back what I want from this other party or to the principal of the thing.” And it’s an easier decision when you have things on your side, and I say things, equal tools I’m going to talk about here in a second, that are going to be able to provide you some support in the financial outlay for an attorney.

I talk about in another podcast. It’s not anything new, and I’m the first one to tell you guys I much prefer helping you to be proactive in your business than reactive as an attorney. Why is that? Because it is more costly. Not just money, but that is a big thing, but also the emotional and administrative outlay that you have to put on to fix a dispute. And this is also why contracts are so important. We should’ve said at the very beginning, setting expectations, clear communication. Right. I’m digging down into nitty gritty in this episode. I talk about this in other episodes as well, of how sets expectations, it’s a legal protection tool. Well this is a podcast that we’re digging into how it’s a legal protection tool and how it’s a strategic tool if things come up being a problem.

So on this number three point here, if you don’t have an attorney’s fee section that talks about who is awarded, should there be a dispute brought, then you could barely not receive anything. The only other way that you can receive attorney’s fees is if the other party has violated some sort of act or statute that specifically prescribes attorney’s fees. So this is you then relying upon the law that’s written out there to provide you attorney’s fees. A clear example of… Well, I’m not going to go down that path. I was going to say with copyright, if you have registration, that’s one of the class C examples that you guys may know the most about, that has attorney’s fees in there that is written into the law. But we are talking about contract stuff here. All right?

So let’s talk about this attorney’s fees thing, for one more minute. Keeping in mind, and depending on the state that you’re in, will define as to what should be included in this attorney’s fees provision. Some states really weigh heavily on making sure that contracts are as balanced between both parties as possible. Like so how that would apply to attorney’s fees provision is, that they would then have to… It would have to say something to the effect of, the prevailing party, “Should either party bring,” and please don’t just write this down because I’m going off the cuff here, although I’ve written it a million times, “Should either party have to bring a dispute, the prevailing party will get attorney’s fees.” Right? That’s not the full language. So don’t just utilize that.

But that’s saying that either party to the contract brings a dispute, then you know obviously the one who wins will get their attorney’s fees. Now you could be in a state that allows for it to be one sided and there are strategic times that this is beneficial and can and be appropriate, it basically is saying, “If X party,” so X could be you and we would probably want it to be you if we’re trying to safeguard you, but if X party has to enforce this agreement,” or, “Brings a claim, a dispute under this agreement,” something to that effect, “And they prevail, then they would get attorney’s fees.” So it can be one sided, it depends on the state that you’re in. But guess what? If you don’t have a written contract, written executed contract, and there’s no other prescribed law that outlines attorney’s fees award, guess what? You could get nothing. You would have to then go back to what we were talking about, making the decision whether or not it’s worth even trying to follow through. All right?

So guys, let’s… Class, what did we learn here today? We learned that the three major elements, and this is just some of the legal protection aspect of having a contract, this is not everything, not fully comprehensive, this is Business Bites, we get in and get out, but these are three major things that I see what happens when you don’t have a signed services agreement. IP rights are not defined. That could even come down to keeping you from getting a trademark, defending your work, or even having control over whatever the product was that was created. Two, you don’t have any control over the jurisdiction or venue, so it could be becoming very inconveniencing, and financially burdensome, or even crippling to you.

And lastly, if you have to enforce your agreement as much as some of you may sit there and say, “Oh, I don’t have any intention of ever taking anyone to court.” You never know what’s going to happen. It doesn’t kill you or hurt you to have this attorney’s fees provision and this dispute resolution type stuff in your agreements. It’s just a couple extra added lines, it’s commonly accepted, it’s legal boiler plate. But you want to be able to have the opportunity should you have to bring a dispute in, you’re in the right to receive your attorney’s fees back, or then it becomes a numbers game, and you could still be wronged and still end up having to pay out. And that’s not something that… Or make the decision to not pursue a wrongdoer simply because you’ll have to pay out.

This specific episode is going to be episode 89 at rachelbrenke.com/epi89. Link all the episodes that we talked about here today. Self Drafting in Contracts, How to Hire a Logo Designer. It’s not just logo designers, but in that episode I talk a bit more about hiring other people, and that’s really digging deep into the intellectual property, what inner workings and stuff that happens when you hire someone in those capacities. So make sure that you hop over, click on that.

And also, I really do ask of you guys, could you please leave, and if you’re listening on Apple podcasts, please leave a review for me. Let me know. As you guys can see, this podcast is not sponsored. I do talk about my own products some, but really 99.9% of it is just putting out this information so that you guys can save your time and money, and prevent issues in the future. And in doing the reviews, honestly, it does help me out, and so it would be really great if you guys could do that. And I will see you also in the Business Bites Facebook group. Please go and implement, and ask any questions in the group that you may have, and I’ll see you guys there.

About the author

Rachel Brenke is a lawyer, author and business consultant. She is currently helping professionals all over the world initiate, strategize and implement strategic business and marketing plans through various mediums of consulting resources and legal direction.

Hi, I’m Rachel Brenke

Rachel Brenke

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