The problem is many of the contract templates on sale are every bit as lengthy and complicated as legal precedents used by contract lawyers. Unless you’ve got seven years of legal training under your belt, these so called “simple templates‟ can be an overwhelming place to start for the layperson!    

Even where the templates ARE written in plain English they have a fundamental flaw: It is difficult to know how to use or alter them because it’s the details of the commercial transaction which will determine how you should tailor the document. If you lack an understanding of the business context and the dynamics that would entail the need to alter a standard template how can you properly adapt it to your situation? Rarely are transactions so standard that a general legal document is adequate.  As I explained in my blog  Why use a lawyer when you can buy a legal agreement? last week entrepreneurs would do far better to just use plain English and avoid any legalese when writing their own agreements.

If you’re left to grapple with complex drafting alone and then there’s a dispute on that agreement,  you are unlikely to be well positioned to contest the dispute, and it will cost you a lot more than it need do to resolve it.

You do not need to sign a piece of paper to be bound by its terms.

There are many misconceptions about contracts, including the belief that it’s necessary to sign a piece of paper in order to have a contractual relationship. That’s not the case.

When you engage someone to perform a service for you, or agree to sell something to someone, a contract exists between you and the other party whether you realise it or not. The exception is if it’s purely a domestic relationship, which the law treats differently.

If either of you put forward written terms at the right time during your discussions you would have a contract on those terms even though nothing was signed.

It’s important to realise that your email discussions, and telephone conversations are enough to create a binding contract.  If you don’t document the agreement then it will be quite messy and expensive to resolve any disputes later.

In my blog I explained how to document your own agreements informally using plain English instead of relying on bought templates. Here I just want to explain what happens if you can’t negotiate a solution with the other side and need to involve a lawyer to help you resolve the dispute.

Resolving disputes using lawyers

Lawyers start by gathering background information to try to work out the legal answers to the issues in dispute between you.  They will question you on the oral and written discussions you had with the other party before the contract was formed. Details of who said what and when will be relevant to shed light on your mutual intentions and what you “signed up to”, as will any written terms either of the parties put forward.

After building a picture of the background circumstances, the lawyers would apply their knowledge of contract law principles to your situation to pin point the time when the contract was formed in the eyes of the law.  This date would also give an indication of what terms were incorporated within it.  Your discussions or documents sent after that date are generally unlikely to have contractual effect.  It can happen that the contract is formed before people  realise it and the  legal agreement they used had no effect!

Say your dispute is about an ecommerce website being delivered late. You had engaged a PR company and incurred various other expenses relying on the web developer’s promise to deliver your site on time.  The delays left you considerably out of pocket.

Your lawyers decide you have an arguable case to claim that the other side broke the contract.  So, they would write a letter claiming compensation on your behalf.  There has to be a lot of posturing to get the other side to want to conclude the matter without resort to court.  So, the dispute will generally mention legal actions and remedies that the parties could avail themselves of if the other side fails to agree to their demands.  It can therefore be quite unpleasant to be involved in a dispute.

The other party’s lawyers will hopefully give advice along similar lines. So if you have a good case, it’s likely they will suggest their clients be ready to make an offer of compensation to you.  They may not do this straight away, but they will advise their client of the strength of your case.  When the offer is made it will probably be lower than the sum you claimed.  That’s just the way negotiations tend to go.  However, you never know whether the other party is serious or just bluffing, and risk losing the chance of a settlment each time you reject their offer.  Some correspondence will ensue before a final compromise is reached or the matter is escalated to issue of legal proceedings (which is not to say you will end up in court).

If the other side’s lawyers glean some information which they think weakens your claim, they will respond to say you contributed to the delay because of something you did (such as changing the brief) or failed to do (such as providing a list of requirements by a set date), and therefore are not entitled to any compensation, or as much compensation as you claimed and so on.   Generally, after some correspondence back and forth the matter is resolved. Only a tiny number of disputes end up in court. 

That’s not to say it doesn’t matter what document you use.  The better your documentation, the cheaper it will be to resolve disputes, and the less likely you will be to be to need lawyers to help you resolve matters.  The real purpose of a legal agreement is to achieve clarity.  It’s not just to have a piece of paper.  The reason for having a legal agreement is to encourage you to think through the details and discuss them with the other side before the contract between you is formed.  Hopefully if you are like minded you will do a deal and if you’re not, the pre-contract negotiations will highlight it so you walk away from the deal.

As an entrepreneur you will find it necessary to document many of your own agreements, and should know which ones are too important to draft yourself.

Written agreements are binding documents that define the obligations of the parties involved in a specific project. So it’s advisable if you sell a good or service, to have a clear record of what was actually agreed. Memories fade, and a written record ensures that if disagreements arise later about what was actually intended or agreed, you will have documents to look at to see what was actually intended when you entered into the arrangement.

So, should you buy a legal agreement to use when entering into a new type of arrangement?  In my view this can be dangerous because there is no such thing as a standard template.  The context in which you use a template will differ from the ‘standard’ scenario envisaged in the basic template.  So, you will need to tailor the template to suit your particular transaction.

The terms of your particular deal are more likely to be accurately reflected in your document if you avoid using a ‘standard’ template.  I’ve seen many completely rubbish agreements signed by entrepreneurs who drew comfort from the fact that they were using an existing template.  Unless you have solid familiarity with the template and know how to adapt it to suit your particular transaction it may be better NOT to use legal templates as the starting point when drafting your own agreements .  Instead perhaps use them as a guide as to what to include in your own drafting (subject to the point I make below about avoiding use of any legal terminology, or clauses you don’t understand).

If you have a lawyer create an agreement for you and negotiate and redraft variations of it, you may develop the necessary familiarity with that particular template to reuse it on your own.  But otherwise, in my experience it’s safer to record simple agreements by emailing details of the ‘deal’ and asking the other party to confirm by email that the terms are correct as written in your email. Here are a few elements of written agreements to focus on:

1. Define the scope of work.

2. Indicate exactly what is to be done by whom and within what time frame. Also indicate who determines if the work has been completed satisfactorily.

3. Establish time frames.

4. Indicate how long the agreement lasts and how you will be able to terminate it sooner if for any reason either of you want to do so.  There should be a clear exit strategy.

5. Establish milestones and indicate when payments are to be made and clarify payment arrangements.

6. Focus especially on clarity about money issues: who pays what, when and how. What happens if payment is not made on time?

Be sure to avoid using legal language unless you know really well what those terms mean.  Legal terminology if misused could have unintended consequences on your circumstances.  For example, if you intend to give someone sole rights to distribute something but use the wrong term and give them exclusive rights instead, the legal consequence is that you give the other party all the rights, and deprive yourself of the right to distribute that thing yourself.  Nor should you ever say ‘sole and exclusive’.  This is a tautology.  Each of these words has a very precise legal meaning and consequent impact on the scope of the rights granted.  Be clear whether you mean ‘sole’ or ‘exclusive’. That’s why in my opinion  it’s far better to avoid such pitfalls by using plain English.  Say exactly what you mean in ordinary language you both understand.  Whether you’re agreeing something with clients, vendors, joint venture partners, affiliates, or anyone else for that matter, by ensuring the details are documented in a style and language you both understand, it’s much more likely you’ll end up with an effective written agreement.   

The benefit of recording the terms of your agreements in writing is that you air issues upfront and sort essential details out so you stand a better chance of negotiating your own solution if things don’t work out between you.  Next week I’ll explain what tends to happen when two parties end up in a dispute they can’t resolve without the help of lawyers.

Going through this process of documenting your agreement could very quickly show if you are about to engage in business with someone you shouldn’t be entering into business with.

Obviously, complex agreements (especially where a great deal of money is at stake) should always be drawn up or reviewed by a lawyer. It would be false economy not to consult a lawyer if the transaction concerns a commercially significant issue for your business.  Otherwise you will spend ten times as much ultimately on legal fees.

Search Engine Agreements

Search Engine Optimisation (SEO) in the broadest sense of the word, is an important topic for businesses to understand as it is how you enhance your online presence.

Understanding how to obtain the best results from your SEO consultant involves using an effective contract that is written in language readily understandable by both parties.

Looking around on the web, I came across a number of comments and misconceptions about SEO contracts. Many people seem to think an SEO contract is optional, and that unless you sign a piece of paper you do not have a contract.

Basic contract explanation

So it is important to appreciate that when you ask someone to perform a service for you, such as to do keyword research or to optimise your website, a contract comes into existence as soon as an offer is made for an estimated or set price which is clearly accepted.

For example, if you are engaging a web designer, it is enough that the designer knows broadly what you want. For example, this might be based on your having said you want a really nice looking website, and picked a few sites you liked the look of, received a quote, which you clearly accepted. None of that needs to be in writing. You will be bound in contract whether you realise it or not. If one party denies that a contract was formed the law has ways and means of establishing the truth, by looking at certain background facts to work out which of the two parties to believe.

A contract is formed much sooner than is appreciated

Provided it is clear who the parties to the contract are, what the contract relates to, and how much will be paid, then a contract exists as soon as an offer is deemed accepted in the eyes of the law. No formality is needed.

Therefore, you may carry on your discussions thinking you are still negotiating terms when in fact it will be too late to make your further requirements form part of the agreement. Once the contract has already been formed you may discuss details, but that is different from adding new stipulations, such as strict time limits for performance.

Changing your mind

Say it is agreed that the other party will build a website in return for an agreed fee of £5,000, but many of the details (such as whether it should come already optimised for the search engines) have not yet been discussed. If your agreement was based on your having a beautiful static site designed for you, and then later you changed your mind and decided that actually what you wanted was a well optimised site on a content management platform, if the designer could not deliver your changed requirement, and you wanted to engage someone else, you would be in breach of contract. If the designer wanted to, they could ask you to pay damages for cancelling the contract.

Now the fact that in practice most disputes are resolved between the parties because people tend to be reasonable and manage to sort out their disputes without the need to involve lawyers or the courts is no reason to assume that contracts should therefore be ignored. Similarly, the fact that the discussions were oral and nothing was committed to paper does not mean you cannot be challenged about breaking your promises. It would just be rather more messy, and expensive to sort out disputes based on a purely oral contract.

Importance of contracts

Contracts serve many useful functions. Often with search engine optimisation, buyers have a rose tinted view of what they will receive when they engage an SEO consultant. The SEO may want the work, so has less incentive to enlighten the buyer about the reality of what can be achieved within their budget. It is not for no reason that the law cautions ‘Buyer Beware’. It really is more important for buyers to look out for themselves and check that what they are buying is what they think they will get.

But because buyers of SEO or other internet related services often lack the necessary understanding of the service, it is difficult for them to take control.

That is why we have developed our Contract in Context System for helping buyers, lawyers and SEOs to get the know how they need about SEO and also about contracts.  By implementing an SEO strategy for their business, and using a suggested contract template when engaging SEO consultants, small business owners can take control and put in place an effective, plain English, short contract to ensure a successful outcome.  SEOs will learn a lot from the System, even though they already have the SEO know how that is included as part of the System.

Find out more by registering for our free teleseminar “Top Tips to Take Control of your Internet Marketing” on 26 Jan (even if you can’t attend, by registering we will send you details of it).