Why Are Contracts Important

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A contractual relationship is the glue, and legal proof you absolutely must have, to save your legal tush in business. But if you’ve been using DIY contracts, you might want to read on…

Here’s the deal: the types of contracts you’re using might not protect you at all. Because it might not say what you need it to to save you. You might not know what it says at all, actually.

Lots of online coaches and creatives are creating contracts on their own or using free ones they find online, copy/pasted from others, or using contracts passed down from a friend.

That’s like passing around a painting, asking each person to add her own strokes before passing it on again. What you end up with is a painting with no direction or purpose. Just a watered down version of what was originally intended.

Why Are Contracts Important

But unlike a painting where you just end up with a weird looking piece of art, messing with and diluting contracts can have serious legal consequences.

Contract lifecycle management can be confusing. Before my clients came to me and got legal templates or joined my Ultimate Bundle™ program, it meant not being able to:

  • get paid by a client who owed them money
  • legally protect herself in a lawsuit / deal with breach of contract
  • refuse a refund for a product already provided
  • recoup damages for stolen content

You don’t just need to have a contract. You need to have a legitimate contract that actually covers and protects you. Your written agreement needs to specifically address the way you do business, where and how.

If you need to be convinced about why using legit, professionally written contracts is absolutely crucial in business relationships, here are 8 ways contracts actually legally cover your tush:

1 // Chase Away the Bad Guys

Ok, ok. They might not be ‘bad guys’. But seriously, sending a legit (aka. professional looking) legal agreement to a potential client is a solid way to weed out any potential skippers.

“Skippers” are people who sign up for coaching or services and don’t have the best intentions of sticking to it. They’re the people who sign up for something and say, “I’ll see how I like it. If I don’t, I’ll just cancel my credit card or ask for a refund.”

Clients have asked me before, “If I send out a legit looking contract, am I going to scare people away?” And I say, “Let’s hope so! You’ll scare the right people away. The people who don’t plan on skipping payments, stealing your stuff, or issuing a chargeback threat, they won’t mind signing your contract.”

2 // Set Clear Expectations

This isn’t an official stat, but I swear 99% of all contract/client issues are because of misunderstandings. Even misunderstandings because of a failure to pay attention ; )

What is the purpose of a contract

The purpose of a contract is so you can clearly spell out what’s being offered for the parties involved. (the deliverables). For how much, by what means, and what type of support’s being offered.

That way, if/when a client writes you and says “I texted you Friday night and you haven’t responded yet!” on Sunday evening, you can point back to your contract language stating, “The Coach/Company offers the Client support via email only, Monday through Friday between 9am-5pm ET, where a response can be expected within 48 business hours during that time.”

Customizing a contract is key

3 // Stand Up for Yourself and Business

Having a contract where you actually get to customize and set out your own business policies allows you to actually enforce those policies, if you need to.

If you clearly and correctly set out your refund/return policy, cancellation, reschedule, time to use services (i.e., a 6-month coaching package actually has to be completed IN 6 months, not spread over 10), scope of work, and communication (aka. availability and access) policies, you’ll be able to properly enforce them.

For example, it’s totally OK to have a “no refunds” policy, as long as it’s clearly stated in writing in the contract and signed (aka. in your contract terms) before the client signs on to work with you.

4 // Legally Disclaim Liability

On a more serious note, if someone actually ever did sue you or threaten to sue you, you’d have to have a contract, in writing and properly signed, if you had any chance at all to prevent or dismiss that lawsuit from going forward.

If you don’t have the proper disclaimer, legal enforceability, or other legal ish (that’s what I lovingly like to call it), in your contract, you may not be able to block or prevent someone from moving forward with her lawsuit against you.

Besides trying to prevent anyone from being able to move forward with their lawsuit, having the proper legal stuff (for lack of a better term) in your contract is what prevents anyone from being successful against you.

If you properly told someone who you are, what you do, and what you don’t do in your contract, she’s going to have nearly an impossible time suing you because she thought you were acting as her doctor/lawyer/accountant/therapist/dog walker. But the key here is that it had to be properly stated in your contract.

5 // Get That Money

If a client stops paying you or skips out on any money owed, you will 100% need a legitimate contract. With the right language in it, if you have any chance of successfully collecting it.

Whether you sue them for it, send it to a collections agency, or just try a scary letter/email approach, there’s no hope without something in writing.

On the flip side, you’ll need a good contract if a client ever tries to pull a “chargeback threat” on you. That’s when they complain to PayPal/credit card company and ask for the charges to be removed. Which means the money goes bye-bye from your account.

You’ll absolutely need to show that your client signed a contract for the money owed. Including the items/services were delivered. And no refunds were allowed (if, in fact, they weren’t allowed).

6 // Energetic Shift

There’s definitely something magical that happens when clients sign contracts.

The contract is a legally binding agreement that signifies commitment.

Committed clients are clients who show up (literally and figuratively) and who pay on time.

Clients who show up and dive in with you are clients who get results.

Clients who get results turn into clients who refer. Which turns into repeat business and happy client stories for you to promote.

All of that positivity and magic makes you high vibe. Then you attract even higher vibe clients who you thought you could only dream of working with ; )

7 // Protect Your LLC

So you’ve got an LLC, eh? (Can you tell I live with a Wisconsin-ite?)

That’s great! But just having an LLC isn’t all that matters. Acting like an LLC is actually what’s most important to legally protect yourself.

Acting like an LLC

One way you act like an LLC is by entering into contracts on behalf of your LLC, not you personally.

So in the contract process, the beginning part of your contract that says something like, “This Agreement made by and between [your LLC] and [your client]” is super, super important for being all the proof you need that your LLC is the one in the relationship with your client.

That way, if your client ever tries to blame you for something, the only thing she can go after are business assets. And THAT’S the real point of having an LLC, anyway.

8 // It’s Nothing Personal

Ever been in that awkward situation where a client asks you to do something and you feel like a jerk for saying “no”? You MUST get contracts and website policies ASAP.

Once you have your contracts and website policies in place, your language shifts from “I don’t take refunds” to –> “as stated in your contract, no refunds are allowed”. Or “I want you to take my stolen content down because I’m pissed” to “as stated in the website policies available to you when you visited our site and copied our content, all theft of intellectual property will be prosecuted to the fullest extent allowed by law.”

My clients are pleasantly surprised by how much this made them feel like a boss. They feel so much more relaxed and confident in actually knowing contracts can protect their business.

Are you convinced that those DIY contracts you’ve been using aren’t enough to legally cover your tush online?

If you’re ready to get professionally-written, legit contracts in place that you actually understand and know how to use to protect you, I’m here to help.

I work with coaches, consultants and creatives to legally protect their businesses in 2 ways:

  1. Grab any of my fill-in-the-blank Legal Templates and have what you need in less than 15 mins. You can get any contract or website policy you need a la carte or mix & match.
  2. Learn more + get in my Ultimate Bundle™ program, which gives you 10 Legal Templates AND access to 35+ exclusive legal training videos where I teach you how to get paid, protect your content, register your biz, and work with clients online legally.

No matter how you grab my Legal Templates, each template can be completed in 15 minutes or less. So you can quit Googling and get back to work. Each and every legal template also comes with a How-To Video Tutorial. So you’ll know exactly how to fill it out, use it to protect you, and explain it to your clients.

Any questions about what’s right for you? Send me a note right now.

“Am I accidentally doing illegal stuff in my online business?”

Probably! 😳 But we can fix that fast. There are 5 things you need in place for a legally sound online business. Want to use the next 5 mins to learn what they are? Drop your info & I’ll send you my guide:

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  1. Sam, I love this blog! And I think number 1 is the most important one out of the all because if you’re working with the right people from the beginning, the chances that you will have issues with them down the road are a lot lower. I see business coaches working with clients with no contract in place because they didn’t want to “scare” the clients off during the onboard process, and then they find themselves dealing with numbers 2-8 over and over.

    1. Thanks so much, Fabi! EXACTLY – you’re so right. The #1 way to avoid legal issues is to work with the right clients, do the work you’re allowed to do, and do a good job (deliver on your promises!). Thanks so much for stopping in! <3 xo

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