Tips and Tricks to Protect Your Business
I’m Brittany Ratelle, attorney for online business owners. I’m so excited to be here to help you get your business legally legit. I am a business and intellectual property attorney, and I’ve been helping clients for more than 10 years in this space. I’d love to teach you how to make a contract legally binding without a lawyer. (I know this might sound a little funny coming from a practicing attorney!)
However, I know the reality of being a startup business as a small business owner myself. I know sometimes resources are scarce, including money. I want to make sure that you know what you can do to actually draft a solid agreement, get it signed, and get it in a place where it can protect your business.
*Disclaimer: While I hope this information is helpful for you, it is for informational purposes only, and it is not official legal advice. While I am an attorney, I’m not your attorney. So if you have any questions about how this applies to your business or your jurisdiction, please consult with a licensed professional in your jurisdiction.
Truth #1: Contracts Don’t Have to be Written By Lawyers
The first thing that we want to understand is that contracts don’t have to be written by lawyers or attorneys. This might seem obvious or not to you, but I want to clarify. There is nothing special or magic about having a lawyer touch a contract at any stage it might be in.
It’s not illegal for you to draft your own contract. It’s not illegal for you to find a contract on the internet, to get one from a friend, to receive one in a business transaction, and for you to recycle or reuse it. In fact, all attorneys use copy and paste. No one is out there drafting a contract from scratch as if they were Ernest Hemingway. Copy and paste are a lawyer’s best friends!
However, something you may want to consider is looking at where your contract came from. Do you understand what’s in the terms of your contract? That’s the most important part of having a contract. A contract is just an agreement between two or more parties about what’s going to happen.
What are we talking about? What are our promises and expectations for each other? It doesn’t matter how you phrase it, as long as it is clear and easily understood.
A solid contract is the most successful way to put boundaries around a business relationship.
Truth #2: A Contract Doesn’t Have to Be in Writing
The second truth is that contracts don’t have to be in writing. This may be good news and bad news for you. Let me explain. In most states, there are certain kinds of agreements that do have to be in writing because of a legal doctrine called a statute of frauds. They usually include real estate contracts that deal with services that are going to last more than a year, and sometimes a transaction above a certain threshold of money.
We’re going to assume for most of you, we’re not talking about those deals. You’re likely an online business owner. So, those transactions are probably not the kind of deals that you’re doing, whether you are buying services or hiring other people, or you are the one providing goods or services to clients or customers. You are the business provider and that’s the kind of contract that you might be wrangling with day in and day out. And it’s likely that those contracts don’t have to be in writing.
However (you knew there was going to be a however in there because I am an attorney, ha!), why we like to have those contracts in writing and is that people can remember conversations differently. Even when we have recorded conversations. Especially if they’re not recorded, and they were phone calls or zoom calls, people can have a different experience in that conversation.
People Remember Things Differently
You’ve probably seen this phenomenon play out in real life when you’ve seen different people comment and give witness statements about an accident. You have multiple people who saw the exact same thing, but they have different perspectives and feelings about what happened before, what happened after, and where their brain, heart, mind, and body were at that point. All of that can affect their opinion where they might actually have a different experience and a memory in the context of what that accident they saw means to them.
The same thing can happen with a discussion about our business expectations and how we’re going to be working with someone else. A contract doesn’t have to be in writing and certainly doesn’t have to be made with ink and paper (e-contracts are definitely enforceable– don’t let anyone tell you otherwise).
There are also what we call click-wrap agreements or shrink-wrap agreements, which I’m sure you’re familiar with. These are the agreements that you’ve probably, half awake, fumbled and checked the box on your phone when it has to update at 3:00 AM. Those agreements can be enforceable. There are some that obviously are a challenge, just like all things. Lawyers have to get paid; they have a job to do. For the most part, those agreements can be enforceable. The reason why we’d like to have them in writing is that it’s a lot easier and a lot less time and money and resources to be able to demonstrate that the other party agreed to what you were agreeing to and agreed to what you set out in terms of boundaries in that agreement.
Contracts don’t have to be in writing, but it’s a really good idea if they are.
Truth #3: Contracts Should Be Clear
That leads us to truth number three. We know that contracts don’t have to be drafted by lawyers, but lawyers can certainly help. And contracts don’t have to be in writing, but it’s probably a good idea to have them written down. Then, how do you know when to use a lawyer? When is it worth the time and money? Resources are scarce in a startup business, even startups that have been around for a while. There’s usually always something sexier, more fun, and more important to spend time and money on than legal resources.
A Real-life Example
Let me give you an example. A business owner came to me and she had been working on a personal brand and had built a really successful Instagram following. She had someone who was working with her and her business. They’d dropped around the term “partner” (mistake number one). They’d created some products and helped create some things together. This business partner had helped with some videos and was supposed to have some extra connections on how to do that.
They made some money together. And they had said at the time, “Hey, let’s pay out on these online courses, 50/50.” So, they did that for a little bit. Fast forward, the business changes, and it morphs into an online business. You and I both know that things can change pretty quickly. Ferris Bueller was very prescient with that advice!
Suddenly, the online courses needed to be reformed. And now they were going to add a membership, merchandise, events, a coaching program, and other products. This video production guy, who thought he was her partner, said, “Because I helped you with those online courses, I get 50% of all products that you ever create with your brand forever.” For-ev-er – imagine Smalls from The Sandlot saying that! You can imagine my client’s surprise when she said, “We didn’t have an agreement that said that. We didn’t sign anything. That was never my understanding.”
And then there was confusion about a legal zoom binder that maybe was signed, and it turned into a giant mess. The moral of the story is that it turned into a six-figure legal fight that my client had to wrestle with because there was not a clear agreement about a partnership. There was not something in writing about how would they were going to get paid, who was going to own what, what intellectual property was being put into the business, and what was owned separately.
Operating Agreements Are Vital
What were the expectations? How was it going to be capitalized? How was equity going to be distributed? All these questions would have been answered with a clear contract, a very special contract called an operating agreement or partnership agreement. It’s what my client should have had in this situation. She came to me after the fact, which is why all of this wasn’t set up. I could tell you dozens of more stories like this one, unfortunately.
We know that as business owners there are going to be up and downs. There’s going to be a huge learning curve. We’re hopefully going to have new and better problems every year in our business. The game is not to be rid of problems, but to have better problems. But there are certainly some problems that you don’t have to have and you don’t have to sign up for. There is a way that we can help you skip over that, get the wisdom of other people, and be in a place where you can acquire that knowledge. I want you to have a short circuit to the end, to skip over some of those chutes in Chutes and Ladders, and go up that ladder to the top.
But how can we draft a good contract? I’m going to give you the keys to the city right here, from one attorney. I’m going to make sure that if you are drafting a contract, you’re reviewing a contract, and negotiating one. What should you be looking for? What are the top tips for making sure it’s a good one?
A Contract is Nothing to Fear
A contract should be clear and understood by both sides. A fair contract is nothing to fear and if people start to be really weird about having a contract, that’s something to fear. That’s actually a red flag. It’s something you want to ask some more questions about, i.e “Why don’t you think we should have a contract? Do you not have questions about how we’re going to be working with each other?”
If someone comes back and says, “Oh, that has all been in an email,” or “That was in a video,” or “That was taken care of in some different container.” That’s great. Why don’t we just make sure that is the information we’ve agreed to? Let’s make it easy for us so that there’s just one stop for us to go back and make sure we’re on the same page here, literally.
I’m going to walk you through each of these key parts of a contract to make sure you know how to make a contract legally binding without a lawyer. You’ll be a pro in no time!
Key Parts of a Contract #1: Who
A good contract should address the “Who.” It should label the correct parties in a transaction, including their business entities. The mistake I see a lot of people making is that they don’t put the correct name of a business.
If you’ve watched some of my YouTube videos, you are a smart business owner and you know that you should have an LLC set up to protect your liability. This puts a nice boundary between your personal money and your business money so that it’s a business problem, not a personal problem.
If you have an LLC, you have to use that LLC. When you enter into a business contract, you want to make it clear that Brittany Ratelle, LLC is hiring the videographer (not me). I work for the LLC. I’m at the mercy of the LLC, just like everyone else. And if you have a problem, you can take it up with that LLC.
Am I going to be the one likely answering the phone? Yes. But again, it’s that separation that gives you space to be able to handle it correctly and to be able to preserve and safeguard your personal assets. It’s important to make sure people can’t pierce the corporate veil. This sounds really scary. It sounds like it’s one of my fantasy books. But it’s not something you want to happen in your business.
Key Parts of a Contract #2: What
The next step is the “What.” What are both parties doing in this deal, in this business, in this working relationship? What are the expectations? What are the services that are going to happen? That’s called our scope of work or statement of work.
It should be very specific and not vague. What IP or intellectual property is being created? Who owns that? What can they do with it? How long do they get to use it? Are there any restrictions about what they can do with it or what they can share about it? All of those questions should be answered by a clear contract.
Key Parts of a Contract #3: When
The third part is “When.” How long is this relationship lasting or what is the term of the contract? What if someone wants to end it? What if someone wants to call it quits or what we call terminate or kill the contract? What does that look like? What will happen if we terminate because somebody did something wrong? Does something have to go wrong for it to end?
Key Parts of a Contract #4: How
Next is the “How.” How are approvals going to work? How is homework going to work? Do either parties or both parties have homework or milestones? Are there things that they need to do to keep things moving along on the timeline that we established? Are you going to be sharing passwords or access?
What are the assumptions that A needs to happen in order for B to happen? You want to be able to walk that through so that you can answer questions and really be able to give confidence to the person on the other side that you’ve thought this through. You want to demonstrate that you’re methodical and systematic in the way that you’ve approached this relationship and that you’ve done this before (even if you haven’t). Give them confidence that you have thought through how this relationship is going to work from beginning to end. That confidence allows you to be able to close the deal, close the sale, and give people a lot of confidence that it’s going to be a healthy customer interaction on both sides.
Key Parts of a Contract #5: Payment
Another key part of a contract is “Payment.” You want to get this right because if we get the money wrong, we are asking for “more money, more problems.” We are asking for issues. And this is where most people get into disagreements that then turn to uglier disputes and sometimes full-out litigation.
We want to make it really clear. How is payment going to work? Are there payment milestones, or little payments that are going to be along the way? Does somebody have to invoice the other person? What is the payment format? Is it check, cash, or online? Is it going to be a routing number for a wire transfer?
What makes a payment late? Are there late fees? Are there attorney’s fees or collections that are going to be involved? If people aren’t paying on time, you want to make sure you’re aligning incentives here, because people do what they’re incentivized to do. And if there’s no penalty for paying late, some people will pay late. You may not always be good about predicting who that’s going to be.
Key Parts of a Contract #6: Explore What-ifs
Last, but not least, explore those “What-ifs.” Try to put on your Oracle hat. Push yourself far into the future and think about, “What if we were living in unprecedented times? What if there was a global pandemic that shut down the world as we know it? What if goods and services could not be delivered as people expected them to be? What if we couldn’t get materials, couldn’t access things, couldn’t be in certain places?”
This is “force majeure” land. We all lived through it in 2020 and 2021. And when that happened, it was a good reminder to people to check their contracts. What did it say? If people get sick, get hurt, or if they miss their flight – what is that going to look like? What happens if someone didn’t do the original work, or if they copied somebody else?
What happens if someone has fake followers? You find out about it, and everyone else was relying on this influencer count. What happens if people don’t show up when they’re supposed to? What if they’re late for their call, late for an event, or late for their meeting? All of that should be covered in a contract. While we don’t expect the unexpected, we should not be surprised that life finds a way of surprising us.
We should be prepared so that when things happen, we know that there’s a procedure and there’s a system to follow through on how is it going to be handled.
We prefer the devil we know over the devil that we don’t. And so we want to put that in a contract.
How to Know if I Need an Attorney
Now I know what you might be thinking. That sounds like a lot of stuff to think about. How am I going to know what’s likely to happen in a deal? You could be a graphic designer, a photographer, or provide goods. You could be a coach, an author, an influencer, a creator, or a podcaster. Then you might want to work with an attorney who knows something about those industries.
Here comes the crux of the issue. You don’t have to work with an attorney to draft a contract or to make a contract enforceable. There are some attorneys that might waste your time and money. A good attorney with experience in your industry in your type of business will save you both. They will save you time and money on the front end, and certainly, they will save you time and money on the back end.
A good attorney will help you be proactive instead of reactive. They will help to make sure that you do those daily things to keep your business healthy, to use a medical analogy. An attorney will make sure that you’re taking your vitamins, going to the chiropractor, getting your checkups, and doing things you need to in your business. This way you don’t end up in the ER, because you know what the ER entails. It’s expensive, it’s stressful, it’s late nights, it’s tears, and it’s headaches for your business. You don’t have to walk that path.
And if you can find someone who can be a resource to you around that, then you should grab that, hold onto it, and move forward. Those are my tips for how to draft a good contract, even if you don’t have an attorney.
Need a contract template? I’m your girl!
If you find yourself looking for a contract to get started, and want to have a cost-effective resource to be able to do that, I highly recommend that you check out my contract templates at creativecontracts.co. They are drafted by me, an attorney who has helped hundreds of online business owners, just like you. I work with people who have product businesses, who are online and e-commerce, people who are content creators in different formats, and people who are service providers and agencies. I see and help people in those businesses day in, and day out. And I have drafted my contracts for a modern online business owner, just like you.
I’ve included all of these structural things that will help and prompt you to be able to think through what you need for your business. When I get the same problems cropping up in my business, I change those contracts and update them. I’ve also included instructions and video guides to help you walk through the steps. I don’t believe in “gotcha” terms in a contract. I believe in something that can be clear and fair for both sides because that’s what makes a really good, solid business relationship.
Contracts Make Things Easier!
You want to be a business that people enjoy working with and are happy about the outcome. They want to come back to you again and again. They want to send their friends and family and loved ones your way too. I know that’s what kind of business you want to have and want to show up with. I want to help you do that and show up as the confident business owner with integrity that you want to be.
If you want more information and want to know what contracts might be the right fit for your business (depending on what you sell and how you sell it), visit creativecontracts.co. There’s a free quiz on there that can help you walk through the steps, as well as give you personalized recommendations of what you might need for your business. Make sure that you like and subscribe to my YouTube channel if you are interested in more information on how to get your business legally legit.
Thanks for being here and helping to work and make your contracts, and thus your business, cleaner and clearer and ready to move forward with confidence. I hope that you now understand how to make a contract legally binding without a lawyer!
Stay tuned for the next post, where we’re going to talk about how to negotiate and red-line a contract. Even if you get something that you don’t think you know how to negotiate, I’m going to teach you, step-by-step, my best lawyer tricks for how to make sure you get that contract in good shape.
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