Why freelancers should bother with a contract

As a one-man band who already has a multitude of things to think about to keep your business running, you may well have wondered whether a contract is another item you really need on your ‘to-do’ list as a freelancer, writes Sue Mann of Cousins Business Law.

My answer to question would be an unequivocal yes. However as I am a business contracts lawyer you would probably expect me to say that! I will explain why.

Whenever you buy or supply any products or services you are entering into a contract. Most contracts do not need to be in writing in order to be legally binding. The fact that there is no written agreement does not alter that position, except in a few specific cases such as contracts relating to property.

Having established that legally a contract exists whether you like it or not, we need to look at some of the disadvantages of not having a written agreement:

  • If you do not have a written document clearly setting out all the details which apply there will be uncertainty as to the terms which apply to that contract.
  • Although you may think that there are no written terms applicable to your contract, you will need to be absolutely certain that the other party, whether supplier or customer, has not incorporated their own terms of business into the contract. If they have, it is highly likely that those terms of business will be less favourable to your business than to theirs. Terms can be an incorporated in a variety of ways, so this is an area where vigilance will be needed if your business does not use written agreements.
  • If there is no written documentation at all between your business and your customer or supplier, the terms which apply to the contract will be implied into it in various ways. There are various statutes and regulations dealing with the supply and purchase of products and services generally. Others will be sector specific or will depend upon the type of contract, particularly if you are dealing with consumers. In addition to statutes and regulations, court decisions in past cases and trade custom and practice could also have an impact on your contract.
  • Statutes, regulations, previous court decisions and trade custom and practice will, where relevant, apply to the contract automatically, but in some cases it is possible to vary their impact by written agreement. Without checking what applies your contract, you will not know whether it is favourable to your business or be able to consider making any permitted changes.
  • If there is any dispute relating to the contract – for example, about the products or services supplied, payment terms etc. - it will firstly be necessary to establish what terms apply to the contract before it will be possible to determine the rights and obligations of your business and those of the supplier or customer. Working out what terms apply could be a far from straightforward process which may well lead to further dispute.

These are just some of the reasons why I would recommend that you give proper consideration to the contracts entered into by your business, no matter how small it is! Having done that, you may decide that in all circumstances it is reasonable for your business to rely on whatever legal position applies without putting agreements in place. Such a decision will mean that for commercial reasons you accept the lack of clarity as to the terms applicable to the contract and the inherent risks including the potential complexities and costs of resolving any dispute which may arise. 

 

31st August 2015

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