The Importance of Contracts When Working with Clients

Last Updated: May 10, 2022

When entering any type of business agreement, it would be helpful for you to have a contract. While it may seem quite tricky for a beginner to get involved with legal frameworks, contracts aren’t that scary. A contract can be a simple plain-language document that outlines a typical business agreement between a customer and a company. In the world of business, contracts are important for many reasons.

Learning the Lifecycle

From enrolling in a course to renting a property, you will find that contracts are used in every context throughout our lives. Since business is a two-way affair, a contract makes sure that the needs of both the contractor and client are honored.

Contracts Protect Businesses

Some businesses are very lucky with their customers and never run into issues. You might find that you have a mutual understanding with one another, however, at some point, you may run into an unforeseen misunderstanding. It could be that you and your client aren’t always on the same page regarding services provided or overdue invoices.

If you’re working for yourself, you may be in a more vulnerable position, both personally and financially. It is essential to have a working contract that protects you from things such as late payment. It may also protect you from unreasonable requests, for example being asked to undertake substantial changes to a completed project without any compensation. In short, a contract gives you power.

Contracts Protect Clients

As discussed, business is certainly a two-way affair. Your business will seem trustworthy and reliable if it has clauses within standard contracts that protect the clients. It will also make the customers more willing to sign with your business or service because unpleasant stories where a customer has hired a contractor and been left without anything to show for it are on the rise.

Besides these incidents making the customer lose their investment, it also means the customer may lack extra cash to finalize their project. Incorporating a customer protection clause as denoted by UNCTAD is, therefore, a determining factor that may land you the project, particularly if the potential client has contracted rogue companies before. It assists in conveying your professionalism and reassuring them about your seriousness.

Contracts Boost Accountability

A contract is the best way to assign accountability to both the consumer and yourself. Most people will have signed a legal document or contract at some point and will recognize a contract’s implications if they fail to adhere to the terms. In most cases, this is all the motivation needed to uphold

The way you approach a project may be streamlined after realizing you’ve signed up to contract lifecycle management, as you’ll see from Contract Works. Similarly, if a customer recognizes they have signed a contract to make a payment within a specified time, they are much more likely to honor the deal.

Contracts Define the Scope of Work

In an ideal world, there would be a high chance of discussing multiple projects and the consumer’s wish list would continue to grow. In such a scenario, it would be helpful for you to have a crystal-clear scope of work outlined in the contract, as noted by Facility Executive. That way you have the option to refer back to the contract and quickly resolve any issues that may arise.

Contracts Act as a Communication and Collaboration Tool

From its first draft, a contract is collaborative by nature. The involved parties can work hand-in-hand to identify their requirements through the creation of a contract. This way, healthy communication is assured and an ideal collaboration created. After sending the contract to a third party, the collaboration continues upon the commencement of the business relationship. Confidence is created for both.

Contracts are Legally Binding

Upon signing the contract, both you and your customer are held to particular terms that you have agreed to adhere to. So, if you happen to violate any of these terms, the client has the power to take legal action against you as shown by Practical Law. You can also take legal actions against clients if they violate the terms of service.

Therefore, should the matter find its way to a court of law, you’ll just provide the contract as evidence of a breach on either part. It would be best to avoid any client that refuses to sign a contract. If you go ahead and carry out a project without some sort of formal contract or even email interactions, you have to prepare yourself for the eventuality of major problems.

Final Take

You should never overlook the significance of a contract before embarking on any project. It is typically a mark of professionalism, and necessary to inspire some confidence in a working relationship. A well-crafted contract shows you take your brand seriously. Therefore, any customer that declines to work with a contract needs to be treated suspiciously. It is indeed a red flag! Remember, all reputable businesses use contracts in their work.

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