Tag: contract drafting

  • Funny but Binding Contract Terms for Late Payments

    Pizza” by stu_spivack (Creative Commons License)

    One of the biggest challenges facing small businesses seems to be getting clients to pay their bills. Dealing with non-paying clients or delinquent clients is one the most common complaints I hear about from other entrepreneurs. Your first line of defense against these people is in your contract.

    Create an Upside When Clients Don’t Pay – in Your Contract

    You can put anything you want in a contract, as long as it’s legal. (This is why you can’t have a legally binding contract to buy/sell heroin or a human kidney.) Most contracts include a provision about a late fee, so if your client is late in paying you, you can make them pay more, up to the maximum interest rate allowed by law.

    If you are a professional creative, such as a website developer, graphic designer, or photographer, you can put in your contract that you won’t give the client the final deliverables until they’ve paid the balance on their account. This is an effective way to hold your clients’ financial feet to the fire.  

    Don’t Publicly Shame Your Clients

    No matter what you put in your contracts, don’t shame your clients for being late in paying their bill. Don’t put in a provision that says if they’re late, you can put up a sign or billboard, or hire a skywriter to tell the world that the client didn’t pay their bill. That doesn’t help anything. That could easily backfire because it makes you look like a jerk.

    I had some ideas that aren’t publicly shaming, but still could make you look worse than your non-paying client if it became public information, like including a provision that says, if you’re more than 90 days late, every time we send you a reminder, the subject line will be, “Hey Asshole! Pay your bill!” As validating as that might be in the moment, it probably wouldn’t be an effective strategy for getting referrals, or even getting them to pay.

    Free Ideas for Revising Your Contracts

    Recently, I wondered what else a company could put in their contract that would encourage clients to pay their bill and have an upside for the company. For the purpose of these suggestions, “you” and “your” refer to the client and “we,” “us,” and “our” refer to the company.

    • If you’re more than 30 days late paying your invoice, you agree that you will pay for an office pizza party for us every Friday, and we will add the amount to your unpaid invoice as well as send you a photo of us eating pizza.
    • If you’re more than 6 months late paying your bill, we will send a hug-a-gram to your office reminding you to pay us. (It’s like a singing telegram, but instead of singing, they hug you.) We will add the amount of their fee to your unpaid invoice along with a substantial tip.
    • For a web designer: If you are 30 days late paying your final invoice, not only will we not launch your new website, you consent that we can commandeer your current site to promote the charity of our choice.

    Final Thoughts

    Having non-traditional contract terms is not a new idea. Lots of people have had seemingly crazy provisions in their contracts. I want to do more blog posts this year with sample verbiage for contracts that I would love to write, that would be legally binding, and not your traditional legalese.  

    I want to humanize contracts. I love writing contracts in everyday language. Your contract should be written in a way that you and your clients can easily understand it. If you want to hear more about what I’m doing in my business and practical legal tips to run yours more effective, please add yourself newsletter.

  • Why Contracts Have So Many Definitions

    https://www.flickr.com/photos/eleaf/2561831883

    Iron Horse Bicycle Race Durango Women 10″ by Eleaf from Flickr (Creative Commons License)

    This week, I had a chat with someone who was concerned about the media release provision in a contract to be in a cycling race. It said by signing up for the race, you give the organizers permission to use any video or images of you, your likeness, you name, and your biographic information for any purpose without need any additional information from you. He was worried that the race organizers could sell his life story without his permission.

    I’ve seen this provision on every race contract I’ve signed – and it wasn’t one of the ones I altered. This type of provision is on lots of contracts, event tickets, even on A-frame signs around the state fair. Organizers want to use the photos from their event to promote the organization and its activities. They want to be able to make you their poster child if they snap an amazing photo of you. They want to be able to caption a race photo with “Chris Jones, 37, of Truth or Consequences, New Mexico . . .”

    These organizers don’t want to sell your story to make the next Lifetime Movie. I know this because (1) they don’t know your life story and (2) they’re not in the business of sell stories for the next movie of the week.

    This conversation reminded me of why contracts have so many definitions. Sometimes they start with pages of definitions. They help eliminate confusion and avoid disputes when questions arise down the line.

    If there is a dispute about the meaning of a word in a contract, and both sides have a reasonable interpretation of it, the court will side with the person who didn’t draft the contract, unless the contract states otherwise. (Check your jurisdiction’s rules to see if the same rule exists where you live.)

    Going back to the would-be racer, I told them if they had concerns about what a term in the agreement meant, they should email the organizers for clarification. (Never be afraid to ask questions about a contract before signing it.) If there’s a dispute later surrounding the meaning of the provision, they would be able to use the email response as the basis for their reasonable belief as to what it meant and to counter any contradictory statement by the other side.

    If you’re in a situation where you need to create, draft, or negotiate a contract, please call a contract lawyer for help. (This week, my editor sent me an FYI email about a company in Columbia that is selling a “Pack Of Professionally Drafted Legal Contracts” for $24. I responded with “Let me know how that $24 contract holds up when challenged in court.”)

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