What is a contract?
Your interpretation of the outcome of a discussion may be different from the other person’s so having a contract in place . Contracts are created to remove any misunderstandings or ambiguity over what’s been agreed.
Contracts are sometimes a written representation of a verbal agreement, and sometimes presented to be read and agreed before the next steps of an arrangement are taken.
If you think ‘having contracts’ seems a bit too formal and could scare off customers then refer to them as ‘written agreements’. Having something in place will give your business a more professional image with customers because it shows you're prepared to commit in writing to what you’re going to deliver for them.
Contracts are for your own protection
In a business situation a contract will make it clear what you are providing, or expect to be provided with, and when and how it needs to be paid for. The real protection comes from the other parts of the contract which essentially cover what happens if things go wrong and who is responsible for complying with the contract.
It’s not just protection for you, it's protection for your customers and suppliers too. Contracts will make delivery timescales, payment terms, and the returns policy clear and understood. You should put requests for design work in writing, agree prices in writing, agree which version of your brochure you're going to print in writing. A conversation over email is fine for day to day agreements but for longer-term or larger commitments where there's more at stake we'd suggest you use more formal legally written business contracts.
Contracts sometimes don’t need to be written down at all. A verbal request for a service and a promise to pay can be legally binding but it’s a case of your word against theirs unless there’s a witness who can vouch for the conversation. There's a lot to be said for trust but you don't want a good working relationship to suffer simply because there's no clarity over what's been agreed.
Negotiating contractual terms
Some contracts will be non-negotiable, usually loan agreements or equipment rental so you or your customer accept the contract by signing it.
Some contracts are negotiable so will only be signed once both sides are in agreement as to what the agreement is!
As a business you should have, as a minimum, a terms and conditions of sale agreement with your customers and suppliers. Ideally you should make these non-negotiable but there may be occasions where you’re prepared to be flexible.
Always ask a Solicitor to review a contract before you sign anything.