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Contracts: The Prophylactics of the Business World

Once upon a time, a client approached me to work on a project. The guy seemed friendly, the money sounded nice, and the job looked good. We dickered over the details, and then I went to work.

Though I had been a card-carrying IP for several years, I was still sort of naive about business. Truth is, I had never been burned by any of my clients; I did exactly what I promised, and the suits responded with words of praise and big, fat, family-feeding checks. I assumed that this would be another easy-going project.

So I shoved all my other jobs to the back of the workbench and then hammered away at the project for two weeks, cobbling together a terrific product in record time. I shipped it off with an invoice, and sat back awaiting my payment.

It never came.

I made calls, I sent letters, I threatened, I cajoled. I did everything possible -- short of going to court -- to get my payment. No dice. So why didn't I invoke my God-given American right to litigate? Because I didn't have a written agreement to prove that I was wronged, and I felt like I was on mushy legal ground.

Worn down after months of pursuit, and pissed off at the lost time and money, I eventually gave it up. But from then on, I always insisted on working with written agreements.

The Beauty Part (and a Sample)

OK, I'll admit it. A written agreement is not -- not -- a guarantee that you'll never get screwed over. But, believe me, it's a gazillion times better than having only the vague memory of a client conversation. Sure, in many states an oral contract is just as binding as a written one -- but try Xeroxing a copy of your oral contract and giving it to the judge the next time you take a big bad client to small-claims court.

What? You're afraid that your client will be put off by a written agreement? That he or she will suddenly view you as contentious or legalistic? Don't be. If anything, you'll look exactly like the smart IP that you are. Most companies put their agreements with other companies and consultants into writing -- it's just smart business.

The beauty of having your agreement in writing is twofold.

First, if you do a good job spelling out the terms and conditions, you and your client should be totally clear about the nature of your project. And if the person you work with in your client organization is there on Friday, but fired (and gone) on Monday, a written agreement will help the company remember who you are, what you're doing, and exactly how much you should be paid for your work.

Second, written agreements take some of the burden off of you when you do have to argue with clients -- in or out of court. Most freelancers are highly skilled professionals, but many of them find debating with clients difficult, if not traumatic. If you're one of these people -- and there's no shame in being one of them -- a written agreement can act as your advocate and do a big share of the talking for you.

By the way, I'm not talking about having your lawyer draft a 25-page contract at $125 an hour (you do the math!). All you usually need is a letter of agreement. This is a simple letter or email message that spells out the key points of the job, things like: what you're going to do, when you're going to deliver it, how much it's going to cost your client, when your client should make a payment, and anything else that's important to you. Here's what a letter of agreement might look like:

September 3, 2000 Lou Formaggio Big Cheese, Inc. 404 Jimmy Carter Drive Suburban Sprawl, NJ 01001 Dear Mr. Formaggio: This is a letter of agreement detailing the terms and conditions of the Limburger cheese ad. I'll begin the sketches for the ad on September 5 and will send you three completed sketches on September 7. After you've chosen the concept you like best, I will develop the ad and will deliver the final four-color product, via Federal Express, on September 14. The cost of this job will be, as usual, $800. The payment schedule is as follows: please send half at the start of work, and half upon acceptance of the final product. Payment terms: Net/30 days. Please sign and date this letter (see below) and return a copy to me as soon as possible. Sincerely, Irwin Papadapolis             Acknowledged by   Date

Note: if the work you're doing is particularly complex, or your project requires special legal handling -- for issues such as nondisclosure, licensing of intellectual property, and the like -- then you may need an agreement that goes beyond a page or two. You may have multiple deliveries over a long period of time that need to be spelled out in detail, or you may have a 10- or 20-page specification that you'll be working with. Or your client may want you to carry liability or worker's comp insurance, or to agree to indemnify his or her organization against any problems that you may cause as a result of the products or services that you provide. In these cases, you may want to hire lawyer to draft an agreement for you or review the one you've written.

You're Not Alone

Though written agreements are all about protecting yourself, the agreement process is not something that you should do by yourself. It should begin with a client meeting or phone conversation in which the two of you come to some mutual understanding. Afterwards, tell the client that you're going to write him a letter detailing the conversation, and then encourage him to look the contract over and to suggest revisions or changes in wording. (Note: some tricky IPs like to include small, irrelevant details in their agreements -- stuff they know their clients will notice and ask to be removed -- as a way to distract meddling clients from weakening the important parts of their agreements.)

Why go out of your way to involve your clients? It's not a matter of being fair to the suits -- it's a legal thing: judges take contracts that have been shaped by two parties more seriously than contracts that haven't.

Be Prepared for Judy

People have been putting their agreements into writing for hundreds, possibly thousands, of years -- a damned long time, anyway -- and there's a reason for that. They work. So remember: whenever you start a new project, put it in writing. While you may never want to see the inside of Judge Judy's courtroom, you might end up there one day. And if you do, you'd better have your papers in order.