December 06, 2022
We get it. Contracts are boring, confusing, and maybe even a little intimidating. Most people, especially entrepreneurs and business owners, balk at the thought of putting contracts in place for their independent contractors, clients, and services.
They might think contracts aren’t truly necessary if they trust their clients or team. But even when you trust someone with your life, you should probably have a contract. Why? Because it protects relationships just as much as your finances and your work.
But, even as a contract template shop, we’ll admit there are a couple places where you might not need a contract. Let’s dig into whether or not you need a contract below.
Having a contract in place is actually a way to show how much you care about your relationship with your client.
Most of us think that it’s the opposite — when we care for and trust in the relationship between the client and us, we shouldn’t need a contract to solidify it, right?
But actually, in a professional setting, it’s the other way around. Having a solid contract in place is a way to ensure that you protect the relationship and safeguard its longevity. Or, in the case that the two of you decide to part ways, contracts allow you to do that on good terms.
Building a contractual agreement is extremely important for the relationship as it makes VERY clear what the parameters are, both for you as the provider, freelancer, or business, and for your client. You know those sticky situations where clients ask you to perform tasks above and beyond your actual responsibilities, and you’re not really sure how to say no?
A contract saves you that awkward conversation! Now, it’s as simple as: “hey, that’s not in our contract. If we want to do that, let’s make sure to revisit the contract and work it out.”
This is what most people think of when they think of a contract. And for good reason!
If we’ve learned anything in the age of the internet, social media, and texting, it’s that clarity is a business owner’s best friend. Even if you and your client have discussed payment and reached a verbal agreement, that doesn’t necessarily mean you’ll get the amount owed.
Of course, we’re not saying clients will purposefully try to stiff you! (Though some definitely will). Rather, we’re all human. Sometimes we forget what we agreed to, or even misunderstand the conversation. You might think you will be paid one amount, while your client thinks they will pay a different amount.
But when you have a contract with clear payment terms in place, there’s zero confusion to be had!
Additionally, if you happen to run into a client who doesn’t pay, is late, or there’s another reason you don’t receive your money, a contract gives you legal recourse to take them to small claims court if necessary.
This shouldn’t be your first go-to, but if you’ve completed a project worth a huge chunk of money, only to find out that getting your payment is a struggle, making a claim may be necessary. And when you do, you’ll have a legally binding contract to back you up!
Okay, so now that you know why you should have a contract in place for every business transaction, you’re probably wondering if there are any situations where you don’t need a contract.
And yes, there actually are! But they might not be what you think.
If you’re giving or receiving a gift, you don’t need a contract in place. A “gift” would be when one party is freely and unilaterally giving to the other, expecting nothing in return.
This is very different from a barter, though! A gift has no strings and expectations attached to it whatsoever. There are no conditions on it. If that’s not the case, it’s not a gift.
If everything went to hell in a handbasket, you never spoke to this person again, and never received a dime of what you’re owed… would you care?
Most of the time, yes, of course, you would! But other times, you simply don’t — and that’s totally okay! It also means you don’t need to put a contract in place, because you simply don’t care what happens. Whether you have a long-term relationship or not, whether they pay you or not… if none of that matters, then a contract isn’t necessary.
I do caution business owners here, though. Operating without any contract whatsoever might feel like a good idea now, but there are. so many hidden costs you might have yet to consider. For instance, if you’re doing charity work and don’t want them to pay you, you might think that it’s perfectly fine to work without a contract. However, if something goes wrong, you could end up the liable party.
The truth is that a contract is necessary in almost every situation. And yes, we know that putting a contract together is a lot of work! This is why we have a huge collection of contract templates that make protecting yourself, your time, and your money as easy as pie!