10 reasons why contractors must sign agreements with their clients

You’ve already issued a quotation to drill a borehole which the client accepted, so now it’s time for you to present the client with a contract. Having a contract is important for your business because it sets up the relationship between you and your client. It is a legal document that demonstrates each party’s responsibilities, expectations and rights. Contracts are legally binding documents that can provide protection for all parties involved when disputes arise.

Without having a contract, your relationship with your client is based on verbal agreements and trust and that’s really difficult to enforce in court.

But why do you need a contract?

• For Accountability
• To Protect yourself (applicable for both you and your client)
• For the client to sign off on the Scope of the project, and to make it clear what your responsibilities are
• Having a contract is an instruction guide for the work that you’re doing for a client. It instructs both parties on how to conduct themselves and what happens if things go wrong.
• Your contract clearly defines the terms of your agreement, as well as your expectations and goals. Each party to the contract understands their responsibilities and how they will be compensated, and there are no misunderstandings or conflicts down the road.
• Having a contract also gives you documentation of the agreement, which can be helpful if you end up suing one another or in any type of legal matter. A contract also helps define how you will work together in the future, so you can create more contracts down the line if things go well initially.

The list goes on and on for why it’s so important to have a contract. Though there are many reasons to use contracts in business, here are 10 reasons to have a contract in place.

1. WHAT IS A CONTRACT AND WHY ARE CONTRACTS IMPORTANT?
Contracts are formal agreements between two or more parties. They are important because they establish the terms of a relationship, and are useful in resolving disputes. Contracts can be written or oral (although harder to enforce), and are usually enforceable by law.

2. A CONTRACT MINIMIZES MISUNDERSTANDINGS
One reason a contract is important for your business is that it minimizes misunderstandings. Contracts are an opportunity for you and the other party to discuss your expectations in detail and come to an agreement about them. This can help prevent confusion or frustration later on in the relationship.

For example, a contract could specify what is included in the bill and what is not, the scope of work, deadlines and conflict resolutions, whether revisions are included in the scope of work and when payment is due. It’s better to talk about these things ahead of time than to have disagreements down the line over questions that could have been avoided with a clear contract.

3. ESTABLISH PAYMENT DEADLINES AND METHOD
Having a contract in place can help set expectations and avoid any misunderstandings about payment terms between you and your client. When writing your contract, include a section on payment that includes details like when payment is due and how you will get paid (Full payments, Installment, percentages etc).

They also outline consequences of late payment or non-payment, as well as policies for returns or refunds and cancellation.

4. CLARIFY WHAT WORK ALL PARTIES ARE RESPONSIBLE FOR

Having a contract clarifies the responsibilities of all parties, making it more likely that everyone will act in good faith and be happy with the end result. Your goal when creating a contract is to clearly state what each party is responsible for doing, and how performance will be measured against those goals. If someone doesn’t hold up their end of the contract, the document provides clear guidelines on what should happen next.

That clarity means that you’re less likely to have any problems while working with you.

5. A CONTRACT BUILDS CONFIDENCE WITH YOUR CLIENT OR CUSTOMER
A contract builds confidence with your client or customer. Contracts are an important part of doing business because they remove uncertainty and provide a clear outline of the relationship.

You can’t read someone’s mind to know what they’re thinking, so having it spelled out clearly helps everyone get on the same page right away. It also shows that you mean business and are a professional, not just a hobbyist.

7. CERTAIN PRODUCTS OR SERVICES MUST BE AGREED TO IN WRITING
Some business transactions must be in writing to be enforceable, such as those for goods  and services whose deliverables has many contingencies or are not static.

Example: For Water Quantity and Quality delivery, you might want to state emphatically that:

In as much as a survey shall be or has been conducted to determine to potential (Prime) location for the drilling, THE QUANTITY AND QUALITY OF WATER CAN NOT BE DETERMINED or guaranteed until/after the drilling is/has been done. 

There are also contracts involving borehole projects that last longer than a year and may involve huge amounts of money whose value can change over time due to inflations. Also, some countries require that certain contracts be in writing to be legally enforceable. With larger transactions, your Lawyer might also want you to create a contract. If it’s not legally required that you draw up a written contract, it’s still smart to write up a contract.

Whether or not you think you’ll need it later, having it now can ensure that both parties understand their responsibilities and can save time resolving disputes later on down the road.

8. A CONTRACT HELPS PREVENT DISPUTES THAT LEAD TO LAWSUITS
In many situations, a contract can help prevent disputes that might lead to lawsuits. For example, you can add a mediation or arbitration clause to try to work out any issues, instead of taking things to court immediately.

The contract should also include an exit strategy for when things go wrong. If there’s a well written termination clause, you can end the contract without having to file a lawsuit.

9. A GOOD CONTRACT SAVES YOU MONEY IN THE LONG RUN
You should always have your customers sign a contract before you begin work. This provides you with certain protections as a business owner, such as:When you have a contract, you may be able to avoid going to court action against you. When you say, “Oh, I don’t need a contract, because if there’s ever an issue with it, I can take them to court,” that’s true — you can. But who wants to?

Who wants to rack up court costs, and most importantly, time that you’ll be spending that you’ll never get back.

10. HAVING A WELL-WRITTEN CONTRACT IS GOOD FOR YOUR IMAGE, YOUR BRAND, AND PROFESSIONALISM
Having a contract shows professionalism and respect. When you have a contract, it shows that you take your business seriously. It shows that you’re not just some random person who is trying to make money as a side gig.

You’re not just someone doing something for free to fill up your free time. Instead, you’re a professional — someone who has dedicated themselves to their craft.

Having a contract is an important way of communicating this message. In many cases, it will be the first thing your client sees when they start working with you. It communicates the fact that you take what you do seriously and that they should take you seriously too.

If you have a good contract, it’s black and white. It will give the parties their rights and remedies and the person who has breached the contract will know exactly what it is they did wrong. You won’t get into arguments about whether or not they did this or that.

When people are on their best behavior, they like to think that everything can be done with a handshake. But as human nature would have it, things go wrong all the time. So better to have that contract in place before problems arise so everyone knows where they stand.

If you don’t have a contract, and would like one for your business, See a Sample Here >>>