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Top Tips on understanding the contracts your client want you to sign

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Does your client want you to sign their contract?  Should you?

If you know what you are about you have organised yourself a fine set of terms of business (or t&cs) that suit the way your business likes to work.

Most clients will happily work on that basis but there are always a few who will not do so.   Knowing when and how to respond – and which ones are dangerous for you is it a bit of a dark art.

Every week a KoffeeKlatch customer will tell us they have been asked to sign a contract and often as not they don’t understand the contract.   That is not because our customers are stupid, but because contracts can be extremely long and boring documents full of words and legal jargon that you don’t see every day.  It is easy to lose the will to live and just sign them.  But should you?

Words to look out for in a contract

A lot of corporate contracts are designed for multi-million-pound projects and are deeply inappropriate if you are just doing a few days training or coaching, or providing a quick update to a website, or doing some diary management.  Big corporates use big contracts on a ‘grab it all’ basis and they can often go so far that if you agree to them you will be functionally unable to do business with anyone else.

Here are some words you should look out for: –

  1. Warranty – a warranty is a legal word for a promise.  But it’s not like politicians promises.  If you warrant something is true – for example I own the copyright to this material and you don’t you are opening yourself to being sued if that is not true.   If the contract is asking you to warrant things you want to be pretty sure that is the case.  If it is not true it can also invalidate the contract which can mean you won’t get paid.
  2. Indemnity or a promise to indemnify as a promise to pay if something goes wrong.  In a client’s contract, this normally means you are promising to pay them.  You should be extremely careful to understand exactly what you are being asked to indemnify a client against.  You may also want to check this against your professional indemnity insurance since if the two don’t match up, you will be left holding the baby if something goes wrong.
  3. Cancellation clauses can be a big problem.   Your client may want to book you exclusively for half a dozen events but reserve the right to cancel at no notice without even paying for any travel you can’t cancel (we saw one of those last week – we are not making this up!).  Be very sure you know what any clauses around cancellation mean.
  4. Variation clauses (the right to change the contract) can mean that only particular people can change the contract, agree to your terms etc.  They can also be used to restrict how this can be done – by fax to head office, by email, by letter, or carrier pigeon!   If you are going to need to renegotiate all or some of the terms (as we often do with our clients) then you need to be sure you use the right method with the right person.
  5. Incorporation.  Words like incorporate usually mean the client is including other documents as part of the contract.  These could be supplier policies, payment policies, GDPR policies.  It is not uncommon for there to be dozens of them running to hundreds of pages.  We even see contracts that refer to documents that are not available as links or attached.   These can contain clauses that also give promises and liabilities you may not be aware of.  The fact you haven’t seen them or read them does not mean they don’t apply.
  6. Appendix or Appendices and Schedules.   These normally form part of the contract but quite often nobody bothers to send them.  You need to check you have all of the Appendices and Schedules mentioned in the contract since they too can have things in them that radically change the main body of the contract.
  7. Whole agreement clauses.  These normally mean that nothing else you agree is valid.   Be careful about that if you are looking to make changes.
  8. Copyright.  A staggering number of corporate contracts simply claim copyright in your material.   This means you can’t use it again for another client.  This is quite distinct from a license to use, which you may in certain circumstances be prepared to grant.  Be very careful about assigning your copyright if you rely on your material to service other clients.   There is nothing to stop a client who acquires your copyright from using it again without paying you again, or from giving it to your rival to use in your marketplace.
  9. Payment terms may be extremely long and the definition of the payment date may make them longer still.  Be careful you understand how to calculate a payment date using their terms – it could be a lot later than you think.
  10. Trademarks and branding.  The contract may prevent you from putting the client on your client list or from using any of their branding.  Some are drawn so widely that you can’t even put their logo on the material you are producing for their own use!  Make sure you know what you can and can’t do.

Should you sign that contract?

It is easy to give up if you are a small company and work on the basis that you either sign that contract or lose the business.  But it isn’t necessarily so.  It is often possible to get the client back to your contract or get their contract properly modified to be more appropriate to what the two of you are doing.   It is something we get involved with all the time.

Here at KoffeeKlatch, we translate legal jargon into ordinary English and help you figure out if that works for your business or not.  We like to help to make sure you know what you are doing so you can start that work with confidence.

If you’d like a quick translation of your next contract we’d be happy to help.  Purchase a couple of hours of our time and send us the documents.  We’ll do a quick review and send it back to you with our key concerns annotated in the contract ready for you to negotiate with your client in a friendly way so you can get it all sorted out.  Just click the clock below to get started.   

 

 

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