Entering into a verbal contract with clients is a common practice among independent professionals. Without the red tape and bureaucracy that can slow down larger businesses, independents enjoy the advantages of being flexible and agile in transactions and deals.
However, while verbal contracts often simplify business, if things go sour they can end up complicating your relationship with your client relationship. So, what’s the best way to protect yourself from a bad situation? Follow these four tips to keep your business both agile and safe.
Of course, the very best way to protect yourself from issues surrounding verbal contracts is to forgo them completely and use written contracts instead. While this may not be realistic in every situation, it’s often worthwhile to get that all-important client signature. Your contract doesn’t have to be complex—a simple statement of the terms of your agreement that is signed both by you and by your client will suffice.
While most verbal contracts are legally binding, there are a few important details to be aware of. First, both a written and verbal contract must consist of an offer, an acceptance of the offer, and consideration. Consideration means that both sides have to agree to give something up. For example, a client may agree to give up $300 if you agree to give up the time and effort it will take to redesign their website. Second, most states have enacted the Statute of Frauds, which is a law that says certain types of contracts must be written. These include contracts for the sale of land, contracts for the sale of goods valued at $500 or more, and contracts that can’t be completed in less than one year.
At the end of the day, if you find yourself in a court battle, verbal contracts can be difficult to prove. Having a written contract in place removes that risk.
If it’s impossible to get a client signature, you’ll still want to record as many details about your verbal contract in writing as possible. Take in-depth notes on your discussion and agreement either during or immediately after your meeting or call. Save any and all files related to your contract, and document all action you take as a result of the contract. By keeping this information, it will be easier to prove that a verbal contract existed if you ever need to support your side in court.
When legal cases involving verbal contracts occur, another method often used to prove that the contract existed is to provide a witness to the conversation. If more than one reliable person is willing to swear that a contract was agreed to, the case becomes more than a he-said, she-said situation.
Another effective way of proving that a verbal contract is enforced is to follow up with your client immediately after your conversation via email. Restate the terms of your agreement in detail, referring to your phone call or meeting as their source. Let your client know that you are simply confirming the details with them, and that you would appreciate it if they would reply to ensure you both understood the agreement correctly. An email exchange of this sort would provide ample proof of an existing verbal contract.
By taking a few precautionary steps every time you enter into a verbal contract, you can protect yourself from potential difficulties down the road. If you have further questions about verbal contracts, is advisable to consult with an attorney for information pertaining to your specific circumstances.
This content from MBO Partners does not constitute legal or financial advice.
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News and notes for independents and their clients. This is the June 13, 2016 edition.