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Contracts 101: How Putting it in Writing Helps You Get Paid

In a perfect world, we wouldn’t need contracts. We’d all just shake hands, take each other at our word, and do the job we promised we’d do for the price we agreed on.

Of course, we don’t live in a perfect world. Ask any freelancer if they’ve ever done a job and not gotten paid. Almost all of them will shrug and nod.

And it’s not just freelancers; it’s everyone. Plumbers, design studios, big businesses, restaurateurs, contractors, you name it: we’ve heard stories from nearly every profession about clients delaying payment or just flat-out refusing to pay for work done.

So how do you avoid working for free? Simple: a contract.

What’s less simple is exactly what you should put in that contract. Every profession and every contract is different, but there are a few tried and true rules you should keep in mind when you’re creating one for your business.

Don’t Start Work Without a Contract

This is a big one. If you’re entering into any business relationship, put it in writing first. Don’t start any work until that’s done. Retroactively creating a contract never works as well and your leverage is diminished if you’ve already started.

Getting a contract up front sets clear boundaries and roles for both parties. It protects you and your client. And, in the unhappy event you have difficulty getting paid down the line, a contract is the proof you need to get what you deserve.

Go Ahead: Negotiate

People sometimes fret about negotiating contract terms. They worry that the process will scare away their client or that their client has all the power. Sometimes, those people are just happy to have work.

This is the sort of thinking that gets you into trouble.

While your client is certainly able to find another provider, remember: they’ve chosen you. Stay strong on the points that are deal-breakers for you and be willing to budge on the ones that aren’t. Contracts are about compromise.

Think About How You Want to Get Paid

It’s a good idea to spell out your pay structure up front in the contract. Since every job and business relationship is different, there is no hard and fast, universal rule here.

That said, consider having several payments throughout the course of a job. It’s usually bad policy to have your client pay you only at the completion of the job. After all, you’d be working the entire time for free. If they simply refuse to pay at the end, they’ve got your work product and you have no money. Sure, you can take them to court, but that’s a gigantic hassle. Getting paid up front (and incrementally throughout the job) can safeguard you against that contingency.

Understand What You’re Signing

This might seem like a no-brainer, but a lot of us sign contracts without reading the entire thing. After all, who reads those terms & conditions they agreed to when they signed up for Facebook?

And even though we’re all obviously more diligent when we’re entering into a business arrangement, people sign contracts without really understanding them all the time. Read each sentence. Understand what you’re getting into. Because once your contract is signed, you won’t be able to change it. Which brings us to our next tip:

Don’t be Afraid to Hire a Professional

Some contracts are easy. Maybe the job is small or the parties are in agreement on pretty much everything; contracts like that can often be signed and executed without the help of a lawyer.

On the other hand, for bigger jobs (or more complicated ones), think about hiring yourself an attorney. A lawyer will be able to spell out what you want in the language that will hold up in court. A lawyer will be able to explain exactly the sort of relationship you’re entering into.

Plus, lawyers negotiate professionally. Where you might not want to haggle with a client for fear that it will sour your relationship, your lawyer’s job is to protect you professionally. Let him or her do the negotiating, especially if your client has an attorney of their own.

It’s Okay to Re-Use Contracts

Depending on the kind of work you do, you may be able to re-use a contract for other, similar jobs down the road by just amending certain small details, such as your client’s name or overall cost. If a good contract worked for you once, why reinvent the wheel?

If you’re thinking about making what’s typically called a “master contract,” definitely have a lawyer look that over. After all, if you want to use it over and over again, make sure it’s a great contract in the first place.

The bottom line is this: a solid, well-written contract will help get you paid. Put your agreement in writing, up front, and fulfill your end of the bargain. A well-written contract will compel your client to do the same and, at the end of the day, you’ll both get what you want: a fair deal at a fair price.

To get started, Rocket Lawyer legal plans allow you to easily create business contracts online, and you can even have a local attorney review your document for free with the included Rocket Lawyer On Call service.

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