#200 - What Makes An Excellent Contract?
It’s the 200th episode of the Rise Up in Business podcast and I want to celebrate by talking about one of my all-time favourite topics—contracts.
They’re not just a legal requirement to get out of the way. When done right, they can be a powerful tool for navigating the stress and success of running your own business.
So what’s the difference between an ineffective contract, and an excellent one?
Well, the first thing to remember is that your contracts belong to you—yes, even if a lawyer drafts them. They're an extension of your business brand. It's so crucial to ensure they look and sound like your business.
Imagine presenting a 42-page contract drafted in indecipherable jargon to your clients. Is that a good look? Absolutely not.
Instead, we want to create contracts that are on-brand, understandable, and worthy of pride. This is your business’s voice, after all.
When I’m drafting or reviewing contracts, I focus on the following four pillars of excellence:
1. Protection
Contracts must provide security for both parties involved. It’s not just about warding off potential issues for yourself but also about setting clear expectations for your clients. This includes detailing the services offered, setting boundaries, and clearly defining terms to avoid what's known as scope creep.
2. Clarity
The primary purpose of a contract is to lay down clear expectations. Define responsibilities, timelines, and terms of payment explicitly. By doing so, you can avoid surprises and ensure that both parties are aligned in terms of what is expected.. Not only does it help you navigate misunderstandings, it makes sure you preserve the relationship too!
3. Practicality
Contracts need to work practically in real-world scenarios. Whether dealing with situations where a client defaults on payments or adjusting the scope of work, your contract should provide a clear framework for these eventualities. By doing so, you empower yourself to act confidently without the fear of overstepping legal boundaries.
4. Flexibility
Allow your contracts room to breathe and grow with your business. They should be adaptable enough to accommodate changes without requiring a total rewrite every time your business takes a new direction.
Once you’ve considered these pillars, you also need to be wary of common 'contract killers' that could sabotage your efforts. Unnecessary formality, missing essential clauses, unenforceable provisions, and inconsistent terminology can all undermine your contract's effectiveness and your professionalism. So get help from a professional who can make sure your contracts are legally compliant and reflect your brand.
Ultimately, excellent contracts are your most crucial business tool. They underpin growth, protect against risk, ensure you get paid, and help navigate tricky situations. Whether it’s a client service agreement, employment contract, or website terms, the principles remain the same. Make sure they're clear, protective, practical, and flexible.
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[00:00:00] Tracey: Hello everyone. And welcome to this very special podcast episode. This is episode 200 of the rise up in business podcast. And I am both so proud to have reached episode 200 and so grateful that you are here. listening to the episodes as, and when I deliver them, it means the world to me to have this platform, to be able to share as much value with business owners as I possibly can.
[00:00:49] Tracey: With the intention being to educate and empower and ultimately to enrich lives. So thank you for listening. If you're a long-time listener, thank you so much for being here and for all the beautiful feedback that you have provided to me over the course of the podcast.
[00:01:02] Tracey: And if you're new around here, Welcome. And I really hope you enjoy the podcast. I also want to share with you some changes that I'm making to the podcast. Now that we've reached episode 200, I've spent a lot of time reflecting on how I can make it better, how I can bring even more value to my listeners and what else can I do to make sure that the podcast is doing what I want to do, which is enriching lives.
[00:01:32] Tracey: helping business owners in any way I can. from now, from episode 200, episodes will be coming to you every fortnight. So for the last 200 episodes, I have delivered these. Week in and week out. So they've been weekly episodes going forward. We're going to be shifting to fortnightly episodes because I'm going to spend more time being even more intentional about my episode planning, my content planning and delivering to you what it is that you're telling me you want from me. And as a part of that, Is answering your questions. So at the end of each fortnightly episode, now I'm going to spend just a couple of moments answering some questions that I'm receiving from you, either off the back of a new podcast episode or over on Instagram or LinkedIn, where I'm very active and where beautiful business owners like yourself are reaching out to ask me questions.
[00:02:27] Tracey: And my reasoning behind that is, as it's always been, if one person's asking. There will be many others that are wondering the same thing. So you'll now be receiving that at the end of each episode starting today. At the end of this episode, I'll spend a few moments answering some questions. And so I really hope you love that.
[00:02:44] Tracey: And I invite you now to always feel free to reach out, to ask me questions if there's anything at all. That comes up for you when you're listening to the episodes and you think, gosh, I wish she would have spent some time on that. I'd love to know what Tracy thinks about this. So what does she say about that?
[00:02:58] Tracey: Reach out and let me have the question. So happy to answer it for you. You can reach out to me via my website. You can reach out via DMS on Instagram, or you can reach out via DMS on LinkedIn. I will receive all those messages. I will respond to you. And I'll also take some time here to answer it for you.
[00:03:17] Tracey: So moving on, let's dive into today's episode, special episode 200. I'm diving into one of my all-time favourite topics, and that is contracts. I talk a lot on all of my platforms and to all of my clients about excellent contracts and my love for contracts and why contracts are so important. In this episode today, I'm actually going to step you through what makes an excellent contract.
[00:03:45] Tracey: So you've been listening for a while and you're saying, great, sure, Tracy. I know they're really important. I know I need to have them. I know they need to do certain things, but what makes a really excellent contract? Let's dive in. The first thing I want to say is your contracts belong to you. They are yours.
[00:04:04] Tracey: So you might think that goes without saying, but it actually doesn't because some people think that because a lawyer drafts the contract, it's okay for the contract to look like the lawyer's work. It's not. It's absolutely not. your contracts should be branded because they're an extension of your business.
[00:04:22] Tracey: So it's no good having a 42 page legal document that looks like some lawyers drafted it. You've changed some words, or you've inserted your names and you've issued it to your clients. That is not going to help you convert prospects to paying clients. That is not going to help you build your brand and that's not going to help your business grow.
[00:04:40] Tracey: Your contract, the very first thing I want to say is that you should be proud of it. It should be on brand. You should be able to understand it. There are no prizes for legal jargon in contracts. A document full of legal jargon does not make a good contract. That's the first thing I want to call out. We see it all the time.
[00:04:59] Tracey: I see it when people reach out and ask me to have a look at their contracts to tell me whether or not it's okay. Is it doing the job? Does it need some changes? And some of them, I just sit and put my head in my hands and think, gosh, we've got such legal jargon in here. for example, as A4 said here to under, I mean, I'm quite sure anybody listening to this podcast does not use that language in their day to day business interactions.
[00:05:25] Tracey: So therefore, that language has no place in your contracts. That really stuffy formality doesn't need to be there. Here's a hot tip. If you're a sole trader, you don't need to be referring to yourself as the company through your contract. There's a disconnect there and automatically when readers are reading it, they're thinking, well, who's the company?
[00:05:45] Tracey: I'm dealing with a sole trader. Why are they calling themselves the company? And when we're looking at terminology like. The provider, you can use your name. The contract doesn't have to say all the way through the provider. The provider will provide you the services as here under outlined. That's not on brand for anybody that listens to this podcast.
[00:06:07] Tracey: Hand on heart. I know it. So it's things like that. When we talk about where to start, that's the first thing I want to say. Be proud of it. It should look like you, it should sound like you, it's yours. You have permission to have a contract developed that's an extension of your business.
[00:06:26] Tracey: The next point I want to share when we're talking about what makes excellent contracts is that your contracts should be comprehensive without being overwhelming. There are no prizes for having the shortest terms and conditions or the shortest client agreement. In the history of the world. Some people say to me, I don't want this to be any more than two pages because my clients don't like to read them.
[00:06:51] Tracey: To that I say, I'll bet you your clients haven't actually read an on brand, plain English contract tailored to your business. Because if they have, and if it's done well, they should be excited to work with you by the end of the agreement. Not thinking this is stellar. This person I'm working with only has a two page contract.
[00:07:10] Tracey: Therefore, I'm going with them. I'd like to flip that script for a moment and say to you, please don't pride yourself on the shortest contract. We don't need lengthy ones, don't get me wrong, that's not what I'm saying. But by opting to have something as short as possible thinking you're doing your clients a favor because they don't like to read them and they get overwhelmed or as one client said to me, my clients freak out if they receive something too long.
[00:07:34] Tracey: I challenge that and say to you, I'll bet you they don't actually, I'll bet you they don't freak out. By receiving something too long, but they would love to receive something that's clear, concise, says all the things that needs to say it's on brand. They can understand it and they feel really good when they get to the end of it.
[00:07:52] Tracey: That's what your contract should be. Food for thought here. If you have a contract that's really too short, chances are it's missing some of the critical clauses that you absolutely need to have a legally enforceable agreement. So the message you're really sending is you're not professional or you don't know what you're doing and you don't want to be sending either of those messages.
[00:08:11] Tracey: Of course you don't. So no prizes for the shortest. Let's stay away from that mentality and let's instead focus on developing something that's comprehensive enough. without being overwhelming and that sends the right message to your clients and that is legally binding. That's a big one. Just on that, we want to make sure that you have the clauses you need so that your contract is legally enforceable.
[00:08:37] Tracey: I have seen some of the most beautiful documents put together by my creative clients that my clients now they weren't when they put their documents together. Some of the most beautiful documents put together that weren't practical to enforce. Couldn't be enforced, missed some of the key clauses. It was so simple and pared back when it came to content or the volume of clauses in the agreement that whilst it looked lovely, it looked beautiful, it was designed so well, but it's lacking the substance, it's not practical, we can't enforce it, guess what?
[00:09:11] Tracey: It's not worth that beautiful paper it's written on. Or printed on, I should say these days. So I just want to caution that, that we still need to focus on practical enforceability, because that protects both parties. So that's the starting point when we're looking at a contract and we say, right, we need to make sure that this very important document is clear, it's representative of me and my business.
[00:09:38] Tracey: It doesn't sound like a lawyer from the 60s has drafted it. It's not 42 pages long that I can't understand. It's none of that. It's on brand and I'm really proud of it. That's the first thing. The second thing is we want to make sure it's comprehensive enough without being overwhelming and it's not too short such that we're sending the wrong message.
[00:09:54] Tracey: And the third thing we want to make sure is that it is practical and it can be enforced. So that's where you start when you're looking at a contract. That's the starting point. Now that I've shared that, I want to share with you the four pillars of excellence when it comes to creating excellent contracts.
[00:10:11] Tracey: Four pillars. These are the four areas that we need to focus when creating excellence in our documents. The first is protection. Your contracts You need to protect both parties. They're not one sided. We're not a bank. They're not one sided. You're a service provider. You're providing beautiful services for your clients.
[00:10:31] Tracey: And you want to make sure that your contracts are representative of you. And part of that is. protection for both parties. So your contracts will outline the services that you're providing, what you're not providing, what your expectations are for your clients, what your variation process is.
[00:10:51] Tracey: We don't want scope creep. That doesn't help anybody. And this sets both parties up for success because both you and the client know what to expect. Moving forward, and your client knows that they're not going to receive unexpected invoices from you unless it's been through the variation process.
[00:11:08] Tracey: So, as I say, transparency, setting both parties up for success because the contract, first pillar, protects both parties. So, first pillar, protection. The second pillar is clarity. The whole point of having documentation in place. is to provide crystal clear clarity on what's expected from both parties to avoid misaligned expectations or misunderstandings down the track.
[00:11:33] Tracey: So this document, if done well and tailored properly for your business, will help you avoid Misunderstandings with clients will help you avoid missing the mark when it comes to what it is that the client wants from you. But it'll also be a really valuable tool in the event that something unexpected does arise and you need to navigate a potentially tricky situation with a client.
[00:11:56] Tracey: If you've got your documentation in order and if it's tailored properly for your business and you act in accordance with the document, you can then use it as a tool to help navigate those potentially tricky conversations. And the best part is in doing that. You're able to preserve the relationship, nothing's fractured, and you can continue on with the project and see it through until the end.
[00:12:17] Tracey: And that is what we want. So unexpected things happen in business all of the time. I get it. But this document needs to be a tool to help you navigate that awkwardness so that it can be nipped in the bud before becomes anything significant. So clarity is key. Crystal clear clarity.
[00:12:35] Tracey: What are your processes? What will you be doing? When will you be issuing invoices? What are your payment terms?
[00:12:42] Tracey: Super important. And already, I'm hoping you're getting a sense that this is a light conversation. This doesn't need to be in the trenches pulling your sleeves up. Oh my gosh, it's so horrible dealing with contracts. To the contrary, contracts and processes and systems are my love language. I love this topic and I love developing these for clients because they can have such impact.
[00:13:07] Tracey: And if they're done well, they can be so powerful to help business navigate forwards. And clarity is key in that process. Clarity is the second pillar. The third pillar for making sure you have an excellent contract is practicality. How does it work in real world situations? How is this going to work if a client hasn't paid, they're in my workflow, they've ghosted the email since they got the first invoice, am I going to move on to stage two of the work?
[00:13:41] Tracey: What does the contract say about that? It needs to be practical. It's got to work. You need to be able to see services. You need to lawfully be able to pause. You need to be able to then reassess your workflow and you need to lawfully be able to say to the client when they re engage, sorry, you've lost your spot.
[00:13:59] Tracey: We're not going to be able to meet those dates and you need to not be liable for not meeting those dates. That's practicality or how are you going to avoid scope creep in your contracts, set out your variations, provisions. This is one of the most important contracts for creative, a coach or a consultant, because things change.
[00:14:19] Tracey: Things absolutely change. And you need to be able to navigate that via the framework set out in your contracts. How are you going to navigate it? The process needs to be set out in a practical, clear way. So that you can move forward with confidence, knowing your contracts have got your back. Same with termination.
[00:14:40] Tracey: What does it look like? Both parties need to be able to terminate. Of course they do. But what's the process, whether it's you, whether it's the client, what happens if you're partway through a project, what do you do? It all needs to be set out there. So that practicality is vital to make sure that this on brand beautiful client service agreement or contract you've got in your business can be applied and you can understand it.
[00:15:05] Tracey: And it works in real world situations, so it's no good again, having that 42 page legal document drafted by someone from the 60s, which does not make any sense and which has no practical application here. those types of contracts have no place in your business, shouldn't exist.
[00:15:22] Tracey: So practicality is the third pillar, needs to be practical. And the fourth pillar is flexibility. I bet you weren't expecting that one, but businesses are constantly evolving and growing and your contracts need to have the flexibility to be able to evolve and grow with it. Simple as that.
[00:15:40] Tracey: We have considerations like changes. We have considerations like growth. Businesses are constantly pivoting. Constantly new offerings, your contracts need to have the flexibility to be able to manoeuvre and support that growth and those pivots and that change. So what that means is treating your legal documents as legal foundational documents is so important because then we can layer on changes, revisions, amendments as required.
[00:16:10] Tracey: to grow as the business grows. It means you don't need to go back to the drawing board every single time you make a change in your business and pay all over again to have a brand new one done just because you're experiencing fabulous, beautiful, organic growth. That's not what it should be. And if you've been told otherwise, then suggest you get a second opinion.
[00:16:32] Tracey: So flexibility is really important, but built into that as well. Like I've just explained to you, the benefit of being able to lean on your contracts for things like variations, because a client has changed the scope or because somebody's asked you to add something else on that flexibility also needs to be in there to support that type of growth in terms of project by project.
[00:16:53] Tracey: So making sure Your contracts are practical, goes hand in hand with making sure they're flexible so that they can grow and evolve with you. this my friends is the magic of excellence when it comes to contracts. Just by focusing on what I've shared with you in terms of the four pillars.
[00:17:13] Tracey: Protection, clarity, practicality, and flexibility. That's at the core of what makes an excellent contract because so much flows from that plain English on brand, able to be understood, feeling really proud of it. Knowing how to use it, knowing how to lean on it when things change, knowing how to utilize it when there's a tricky situation with a client.
[00:17:43] Tracey: You want to set yourself up for success in your business. Of course you do. We all do. You wouldn't be here otherwise. So having excellent contracts is the most fundamental step you can take in setting yourself up for success. It is the foundational step. I am a firm believer that properly tailored legal documents for your business are The most important tool your business has for growth, for risk protection, for getting paid, for navigating tricky situations, for all of the things that we face as business owners, the solid foundations start with your legal documents.
[00:18:22] Tracey: So now I've taken you through what I say makes an excellent contract. And this applies, of course, I know I've talked a lot about client service agreements, and that's because that's the most common conversation I have with clients. But the same principles go for if we're talking employment agreements, or independent contractor agreements, or even your website legals, they need to be clear, they need to protect both parties, they need to be practical, and so they need to be able to be enforced, and they need to be flexible as your offerings grow and as your business evolves.
[00:18:57] Tracey: So the pillars are consistent amongst all of your legal documents. no matter what they are. Now, just quickly, I'll just going to touch on some real killers when it comes to contracts. So I call them the common contract killers, and it's just that feeling when you see it and your stomach sinks and you think, Oh my gosh, this is.
[00:19:20] Tracey: Awful, unnecessary formality is the first one. When it's not on brand, you're referring to yourself as the company and you're a sole trader, or you're using daft language like as A4 said or here under mentioned things that just are not you. Number one, biggest contract killer. Number two, missing essential terms, clauses that need to be there that aren't because you've put together yourself or you've copied somebody else's because they were generous enough to give it to you, but you don't know what you don't know.
[00:19:48] Tracey: So you don't know if their contract did all the things it's meant to, it misses things. So the next biggest contract killer is missing essential terms. That's why you need to get these things done properly by someone who is qualified with expertise in the space. The third is unenforceable clauses.
[00:20:05] Tracey: So things like if you're a business coach and you want to lock someone in for 12 months for your one on one coaching and you have a no termination clause. It's unenforceable. You can't lock someone in for 12 months for a one on one service if they decide that it's not working and they want to remove themselves from that.
[00:20:21] Tracey: You can't say to them, you can't terminate, and you now need to pay me the full 12 months. We've all seen it. We've all heard it. They're there. They shouldn't be. Unenforceable provisions. Big contract killer. That's just one example.
[00:20:35] Tracey: And the fourth one I want to share with you is inconsistent terminology. So when you're calling something, one thing in one spot, but you call it something else in another spot. And all of a sudden you start using capital letters and defined terms, but then you've changed to something else partway through.
[00:20:48] Tracey: It doesn't make sense. That's probably something that a more of a trained eye like mine will pick up. I pick it up immediately. That's what I'm trained to do. You may not, but that's even all the more reason why it's so important to have your contracts drafted by somebody who does this. All the time, because there is a knack to drafting, there is a knack to being able to get this right, and the reason I shine a light on that one is because back in my litigation days when I spent my time in court acting for business owners, suing, being sued and ripping contracts apart or challenging contracts in court, being able to rip contracts apart because they were ambiguous or unenforceable because the drafting was so bad is one of the easiest go to.
[00:21:32] Tracey: It's low hanging fruit for a litigation lawyer. So that's why I say to you here, inconsistent terminology is one of the contract killers. So watch out for that as well. That's what I wanted to share with you in relation to one of my very favourite topics. What makes an excellent contract? I really hope that this has shed some light for you and that you've had some aha moments here.
[00:21:53] Tracey: And now when you look at contracts, you'll know straight away. Whether it's good or not, whether it's doing what it's meant to do, because you can really readily identify the contract killers and you can really readily identify whether or not somebody's taking the time to work with a business lawyer with expertise in contract drafting to be able to get the contract legally compliant.
[00:22:18] Tracey: And on brand without, as I say, that 42 page document that looks like someone from the 60s has drafted it. That's what I wanted to share with you about that. I would love to hear from you. I hope it's been valuable. As promised, I've got two questions I want to answer now that I have been asked a number of times over the last couple of weeks.
[00:22:37] Tracey: The first is, do I have to pay my contractor superannuation? Great question. Great question. The answer is it depends. It really does. It depends on so many things. So back in the day, independent contractors didn't have to pay super because you're a contractor. You take care of your own tax, your own super.
[00:22:56] Tracey: There have been many changes to the law around this. And now there are certain circumstances where contractors, genuine contractors can be deemed employees for superannuation purposes only. So you need to look out for that. I talk about this in episode 188 of the podcast where I dive into that and we unpack what that looks like.
[00:23:19] Tracey: So if that's a question that resonates for you, listen to episode 188. And the second question that I have been asked several times over the last few weeks is, are website terms the same as my client terms? And can I put my client terms on the website? Uh, no, and no, no, your website terms and conditions are not the same as your client terms and conditions or your client service terms and conditions.
[00:23:44] Tracey: They're very, very different things. I actually spend some time talking about website terms and conditions in episode 189 of the podcast. So if you're interested, you can dive over and take a listen to that one. There are several reasons why you shouldn't be putting your client service terms on your website.
[00:24:01] Tracey: They don't belong there, and they won't be enforceable. So if you're putting them there, hoping that it's going to make it easier for clients, because they can click on the link and access it. It doesn't work like that. They won't be enforceable. You need to work with a lawyer to make sure that you're getting your client contracts drafted properly.
[00:24:15] Tracey: And so that you can get the support you need to integrate those into your processes and systems because that's fundamental. Having your client service agreement is one thing, knowing how to use them is another. You've got to get it right. The sequencing and the way you issue it to your clients and the wording you use, it all has to be bang on so that you can rely on it, so that it'll be enforceable.
[00:24:36] Tracey: I hope you have found this episode to be of value. And if you have, I would be so grateful if you would share it with a business friend or somebody who you think will also get value from it. I love delivering these episodes so much. Thank you for being here. We're 200 episodes in. I'm so grateful. I will catch you next time.
[00:24:56] Tracey: And don't forget in the meantime, if you've got questions and you'd love to hear me answer it on the podcast. Please don't hesitate to reach out and share.
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