Why Contracts are Important

Contracts might seem like something only big business needs, and many small companies work without them, but if your work is important to you, it is vital to have a contract in place. A well put together contract can make a business relationship stronger and more successful, so it is worth investing some time and effort in getting a contract just right.

When people think of contracts, they often seem daunting, filled with complicated language only solicitors understand, fine print made to confuse the signatory and seemingly endless clauses that only apply in the most unique of circumstances. Documents like this are off putting, and occasionally detrimental to the business process, especially at the beginning of a new working relationship. Contracts don’t need to be pages and pages long, or contain lots of legal jargon or penalties, the most important thing is that all parties understand the content of the contract and all are in agreement as to their own responsibilities. It is very important to make clear what is expected of each party and what will happen if either side fails to keep up their end of the agreement. Being clear on cost is essential too – what is included in the charge and, very importantly, what is not included. A good contract should only contain information relevant to that particular piece of work and should be written in simple, understandable language where possible. Having someone sign something they don’t understand is not a good way to begin!

For general terms of business, applicable to every piece of work, a Master Service Agreement can prove useful to accompany each specific work contract and Naked Element agrees and signs an MSA with every client. This MSA does not oblige either party to work with each other, it merely details the quality of the service or product, each party’s availability throughout the business relationship and the responsibilities they have to each other. Only once a schedule is signed, does it become a binding contract. The MSA defines the confidentiality clauses, copyright details, intellectual property rights, payment terms and the scope of charges as well as liability from each party. These key details are indispensable for any business, whether the project is worth £500 or £5,000,000 as they are crucial if something were to go wrong.

Contracts also shouldn’t be designed to catch someone out, or tie them down unnecessarily, they should be an agreement, put together for the benefit of all parties. Where possible, a clever business person should be open to discussing and amending a proposed contract before it is signed if the other party wishes to make changes. It is also often beneficial to include a clause allowing either party to revisit a contract for adjustment after a set period of time. Being flexible and open to future issues in this way increases trust between parties, making a successful business relationship more likely.

A good contract should:

• Only include relevant information
• Use simple language
• Outline benefits of the contract to both parties
• Be negotiable
• Be adjustable where appropriate

With a proper contract the client will feel they can depend on the product or service they are paying for and can rely on the contract to ensure they will not be out of pocket if something goes awry. By the same token, the service provider is protected by the contract if a client should renege on something that was previously mutually agreed upon. A good contract, that has everyone’s interests covered equally, makes a business seem more trustworthy, as well as more professional, and if everything goes well, more likely to do business again.

Words by Lauren