Top Tips for a Safer Client Contract
So you finally got a call back and that client is ready to move forward with working with you! Great! Now it’s time to get down to business.
How do you make sure you get paid for the work you do? We all hate this part, but the nuts and bolts of a business relationship are the foundation for freelance success. It’s time to make a contract.
This is a part of the freelance gig that most of us all hate with a passion. Let’s face it – not too many people enjoy having to go through the process of reviewing and signing a contract. Unfortunately, it’s a necessary part of doing business.
In the context of a “safer” client contract, the temptation is to automatically jump to the idea of an “airtight” contract that covers every possible situation or scenario. For the most part, that’s just not the case.
Do You Need a Contract?
Of course you do, but that doesn’t mean your contract is formal. Contracts serve many purposes, but the real function is to help everyone know what’s expected. You should know how much work to do and how much you’re getting paid, when you’re expected to be finished, and other technical matters. Contracts help spell these types of details out.
Some freelancers or clients will only work if and when a contract is produced.
Some freelancers or clients will only work if and when a contract is produced. This is often because they’ve been burned in the past and are playing it safe. That’s their preference and there’s nothing wrong with that.
On the other hand, some clients just want to get to work and don’t or won’t move forward if you demand a contract. This can be for legitimate reasons, such as the dollar amount not being worth the trouble for the formality. The situation may call for moving quickly: they trust you, they’re in a really big hurry, they’re comfortable with the arrangement, and the time it takes for legal to review means they can’t move forward quickly.
A client not wanting a contract should set off a warning bell, but don’t automatically reject a client that doesn’t want a formal contract either.
What Makes a Contract?
The most basic contract simply spells out what is being offered to whom and why. The legal terms are offer, acceptance, and consideration. Simply put, in the freelance world we offer our services, the client accepts our proposals, and the consideration for both parties is pay (for you) and the finished product (for the client).
Once the client has engaged you and given you the go-ahead for a project, so long as you in turn provide what they ordered, you should get paid.
The point here is that a formal contract document is not necessary. Contracts can be complicated documents that spell out each party’s responsibilities to the letter, but that’s not always necessary.
Keep it in Writing
One of the keys to safer client contracts is to keep everything in writing. If you have a phone conversation or meet face-to-face, always follow up with an email to spell out what was agreed upon. Bullet points are fine. The point is to make sure that you have a paper trail should a dispute arise later.
Safer contracting means keeping everything in writing, even through an informal email.
Believe it or not, these written communications can become part of the contract between you and your client. In fact, they may be the only form of contract that you really need. From a legal standpoint, any documentation showing that you and your client have agreed upon some terms is a contract.
The most recent documents generally are the only ones that matter. So, if you fail to follow up on that last meeting where the client agreed to increase your payments but “forgot,” you’re out of luck unless you can show in writing the conversation took place.
Safer contracting means keeping everything in writing, even through an informal email. This also serves to ensure you are communicating effectively, and most clients always appreciate the follow up anyway.
Formal Contracts at a Threshold
Do you really need a formal contract for each client? Your attorney would say “Yes!” but let’s be practical – some jobs just don’t justify the extra work. What about that long-standing client relationship where you have a clear process and you trust each other? How about that small project where messing with a contract means you cut your profits in half?
These are just a few examples of when you should consider skipping the formalities and moving forward without that airtight contract. “But that’s not safe!” you say? You can still cover yourself legally without the formalities (see above).
One way to figure out whether or not to move forward without a formal contract is to set some thresholds. Two general thresholds work: amount of money and complexity.
If the dollar amount for a project reaches a certain point, you always reach for the contract. You know how much time it takes to put a contract together. If not, you’ll figure it out at some point. And if you have an attorney review contracts, then you have that cost to cover as well. Practically speaking, you probably don’t need a contract for every project.
If a project starts to get incredibly complicated, you may want to take the time to put together a formal contract. Complexity is the reality of freelancing. Some projects are going to juggle multiple workloads across several team members, and at some point you realize that the project has taken on a life of its own. That may be a good time to move forward with a contract to ensure everyone stays on the same page.
Consider a Kill Fee
One very simple way to make your contracts safer is to always include a kill fee. If you’re not familiar with this concept, a kill fee is the amount you get paid if the client cancels the project, even if you haven’t done a single thing.
Having a kill fee often sets the unscrupulous apart from the legitimate. Industry standards vary, but generally speaking if you ask for 5-10% of the project value as your kill fee, you’re safe.
Even if you don’t use a formal contract, you can get a kill fee established for the project. In any initial proposal you make or final follow up documents, include your kill fee. Also, it’s better to put an exact dollar amount for your kill fee, rather than a percentage in writing. Use the percentage to develop your kill fee amount.
Critical Terms for All Contracts
Remember, a contract is mostly about communicating. Whether that’s a formal document or an email, the key is to get all the pertinent information included.
- Who – make sure to include your name/company and contact information as well as theirs
- What – get specific about your project. Detail what’s expected to be turned in. Word counts, final product specs, or whatever it is you’re working on, be very specific.
- Where – this may not matter if you work from home, but if the client is expecting you to show up somewhere, include the location.
- When – timing is everything, they say. So make sure to include due dates, even down to the hour. Also include when you expect to get paid.
- Why – this has to do with “consideration,” but also helps clarify the purpose of the project. A simple statement like, “to make your website better” is a consideration.
- How Much – here’s the dollar amount. Late payment fees, hourly rates, over-time rates, and other amounts may be included here. Most freelance projects are a firm fixed price – you quote an amount and they agree to it.
Other Points for Pondering
My grandfather once told me, “Only get into a contract with someone you trust.” I think this is sound advice for every freelancer. Regardless of the formality of your agreement, if the client can’t be trusted to pay you for your work, you’re out a lot of time and effort if you need to recover for your work through the legal system.
So the safest client contracting method for working with anyone is to make sure you trust them. If they’ve burned you before, they’re likely to do it again. A contract might make them think twice, but shady clients usually don’t turn into angels just because a contract is on the table.
What has your experience been when it comes to safer contracting? Do you have any horror stories of your own? What about those of you out there who will only work with a formal contract?
You should always seek independent financial advice and thoroughly read terms and conditions relating to any insurance, tax, legal, or financial issue, service, or product. This article is intended as a guide only.