Thoughts About Effective Contracts

Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Some people think contracts are intimidating and others find them mind-numbingly boring. In general, I like working with contracts. I know this makes me sound like a big dork, but it’s true. I get to help my clients protect themselves and write for a living – two things I enjoy.

When it comes to contracts, some clients hire me to review an existing contract and some hire me to draft a contract from scratch. Here’s one thing I learned in law school and have verified to be true in practice: the person who writes the contract, does so in the best interest of their client. So when you read a contract, think about which side wrote the first draft because I will guarantee it’s biased in their favor.

For example, I’ve written plenty of contracts for situations where a business hires an independent contractor to work on a project. The contract verbiage can be very different when I’m representing the business than when I’m representing the contractor. This is why a lot of lawyers want to be the side that writes the first draft of a contract because they want to write in their client’s favor and negotiate from there.

Recently, I’ve worked on a few contracts that reminded me how important it is to still be reasonable when writing contracts. If your contract template is too biased in your favor, or doesn’t give the other side any sense of security in the relationship, you may have a hard time finding people who are willing to sign it.

I’ve seen this in particular to contract provisions about changing or terminating a contract. There are times, like when you’re a long-term service provider, where you need to be able to change the terms of the original agreement to reflect changes in the industry, your services, or your rates and it would be bad business practice to let the customer change the agreement. In some circumstances, the contract says that the provider can make any changes at any time and if the customer doesn’t like it, they can take their business elsewhere – very take it or leave it. Other times, it’s prudent to specify under what circumstances changes will be made, how much warning the customer will have prior to changes going into effect, and how that notification will be delivered.

I prefer to think about contracts as relationship management documents.   When you’re writing or reviewing a contract, think about the expected lifespan of your relationship with the other side and how you want to feel about that relationship at the end of the day. And remember that contracts are binding documents so it’s important that your contracts reflect your needs and protect your interests. This is one of the times where it’s important to make sure you have an accurate document before you sign it because you may not be able to change it later if you realize after the fact that you’ve made a mistake.

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