Last Update: February 28, 2015
Are you a fan of one-page business contracts?
If so, you are not alone. I have met quite a few small business owners who proudly tout their one-page agreements as though they have found the Holy Grail of business contracts. Unfortunately that is rarely the case.
One page business contracts are more like Dixie® cups: inexpensive, designed for uncomplicated situations, and if you drop one on the floor, it won’t make too much of a mess. However, if you step on it, the cup crushes underfoot.
For example, there are only just so many “what ifs” that can fit on a single side of an 81⁄2″ x 11″ piece of paper. Therefore, what usually gets left out of the one-pager business contract are the “elephants” — enormous and threatening issues that can cause major problems down the road (e.g. confidentiality and intellectual property violations).
If legal issues arise that are not covered by your business contract, it’s like an elephant stepping on a Dixie® cup. You and your company get flattened.
Here’s a look at some of the “elephants” that are often omitted from one-page business agreements and why they may be significant to your small business:
Are you sharing your company’s confidential information with someone else? For example, imagine that you are working with a business strategist to help develop a business idea and then the strategist turns around and uses it with a better-capitalized colleague. How would you like it if they swiped it? Or used it for their own ends?
2. Intellectual property
Copying: What are the specific uses that you are permitting for the creative work you provide? For example, you can limit the usage of your work to specific people instead of per say, an entire company. Consider this: will you permit copying of your work? Or taping of a strategic presentation?
Other uses: In the course of your work, you may be generating ideas or deigns for a client. What happens with the ideas that the client does not choose? Have you made sure to retain them for your use with other clients?
3. Resolving disputes
Do you often travel outside of your home state to provide services? If a lawsuit arises with an out-of-state client, where will you resolve it? (Note: Very often state rules require that you bring the lawsuit in the state where your client is located.)
Recently your client provides you with his marketing materials. Unbeknownst to you, he largely lifted them from a competitor. When you decide to incorporate them into the presentation, ad campaign or something public, the competitor sues you. Do you have language in your one-pager compelling the client to step in to help you (and especially, to pay for your legal fees) in this kind of situation?
Speaking of attorneys’ fees, what happens if your client decides not to pay and you have to sue to collect?
Paying for a lawyer to handle the case adds to the amount that you are out of pocket already. And courts don’t often award you those costs in a lawsuit. But you could recover those fees if your agreement provides for it. The same goes for being able to charge interest on your outstanding invoices.
These kinds of legal issues often require specific legal wording to protect you adequately. That means that you probably will not find a comprehensive business agreement (covering your unique business situation) that you can download from the Internet. So, if these issues are important to you, don’t leave them to chance.
Ensure that all of your business agreements are reviewed by a qualified attorney. They may expand the girth of your one-page agreement, but they’ll withstand the weight of an “elephant”!
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