Contracts are a tool to define boundaries & clarify expectations. In this video learn how to use boundary-making tools!

Here is the sixth video in the 10 part Business Boundaries series on Contracts and Other Policies …

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Here is the pdf guide mentioned in the video and below is the full transcript:

Day 6: Contracts & Other Policies Welcome back. This is Day 6 of your “10 Days to Business Boundaries.” Today is another day of defining your boundaries. Today we’re talking about “Contracts.” Contracts, really, are just another tool to define boundaries. When I say contracts, I mean both actual legally binding contracts, as well as other kinds of agreements, and rules, and statements, and just other kinds of writings that may or may not be legally binding. The idea here is that I want to get across the concept that contracts are not something you do just because I’m telling you as a lawyer, [laughs] or just because you’ve read that you’re supposed to do contracts in a book, or people in the Internet tell you that real businesses have contracts, or your business coach, your consultant, or someone told you that’s what you’re supposed to do. Or you want to win a lawsuit, you need to sue somebody.

That’s not the reason to start, do a contract. The point of having a contract is because it is a way to set a boundary. It is a way to clearly define expectations of what I’m going to do and what you’re going to do in a relationship. Here’s the magical thing about a contract. A contract freezes time. It’s really hard to remember what we agreed. It’s really hard to remember what happened yesterday. “What did you have for breakfast yesterday?” Unless you are like me and you’re a weirdo who eats the exact same thing for breakfast every day, you may not remember what you had for breakfast yesterday. It could be really hard to remember what we agreed to three months ago, six months ago, five years ago, especially the exact details.

Even if we go back to a series of emails that we’re piecing together in our Gmail account, we may not be able to even figure out what we both agreed to because there’s no one email that actually says what we both agreed to. Your email says one thing, my email says another thing. There’s no one email that says the same thing, right? The idea of a contract is to have one frozen moment in time. One PDF or one piece of paper that both of us have signed, either electronically or with a pen that has a date on it that says, “Here is what we agreed. Here is what we’re expecting you to do, what we’re expecting me to do.

Here are the boundaries of this relationship.” That way, it’s actually possible [laughs] for us to honor this agreement. It makes it much more likely that we’re going to have a reduction of drama. It’s going to be much more likely that we’re going to be able to comply to the terms of our agreement because we actually know what the agreement is. Now, logistically speaking, how this works in real life depends upon the nature of the relationship and the kind of transaction that you’re having. If you have a one‑on‑one client, and we’re talking about a half‑decent amount of money, you’re actually going to be doing a negotiated contract that may be drafted by a lawyer. It might be custom drafted by a lawyer if we’re talking about a $50,000 agreement, right?

Or, if we’re talking about a contract for, let’s say life coaching, you may have a lawyer draft a template, then you use that same contract with all of your clients. You have them sign it with a pen or you have them sign it online using RightSignature or using EchoSign or one of the different online signing kind of agreements that you can use. By the way, those are just as legally binding as signing with a pen. It’s a great thing to use. With one‑on‑one kind of relationships, also with partnership agreements, with vendor contracts, with independent contractor agreements, with joint venture relationships, totally makes sense to negotiate those. Sometimes you may have a lawyer draft it because it’s enough money on the line, or you can draft a template.

It makes sense to invest in a lawyer having doing that for you. Sometimes you may decide to just handle it yourself because of it’s early on a relationship it’s not a lot of money at stake, but it’s something to actually negotiate and get in writing. If we’re talking about something that’s a transaction that’s done online where people are coming on your website and they’re buying and eBook, obviously they’re not going to download a written contract and sign it with a pen and fax it to you to buy an eBook. Then it’s a different kind of contract they’re going to be agreeing to. They may have your terms and conditions on your website. Same kind of thing if you have employees who work for your business. You may not have an employee contract. In some industries, you do.

You may also have them sign an NDA or a confidentiality agreement, or you may decide in your industry that makes sense to just have an employment handbook. A set of rules that you have your employees comply with, in your business. There’s these different things that make sense depending upon the kind of relationship it is, the kind of transaction it is. But the important thing to always keep in mind is you want to have those expectations and those boundaries as clearly disclosed as possible so people know what they need to comply with, so they know the expectations are to make it possible for them to actually do what you want them to do and for you to actually do what they want you to do. One important thing to remember about contracts is they don’t need to be scary.

They don’t need to have tons of legal leads, they don’t need to be incredibly formal, to be binding, they don’t need to have a bunch of numbers along the edge. Those are a lot about style, and a lot about the culture, the particular industry that you’re in, more than about making it legally binding. You can have a contract that is incongruent with your personality, with your business, with the rest of your marketing, with what’s going to be acceptable to your particular clientele. It may make sense for your particular clients to make it more formal if they’re big corporations, if they’re government entities, or it may make sense for your particular clients to make your contracts very informal, very casual, but still as legally binding as the super formal contracts.

Neither is better or worse as long as they have all the definitions that of your boundaries that are important to you. The same expectations, the same boundaries can be defined in very casual ways or in very formal ways. Your assignment today is to just really start making a list of the different kinds of agreements you may need in your business, or agreements you may need to revise or revisit in you business. This is not something that you’re going to probably handle in one day. [laughs] This is a project that is long‑term and on‑going because you’re going to probably revise them as time goes on and as your business grows and changes and adapts. There’s a couple areas where I really recommend that you focus that are the highest priority for your business because they’re the areas where there’s the greatest risk of things going wonky and you having high drama.

The number one area that I recommend you focus on are if you have co‑owners or business partners. If you have co‑owners, business partners in your business, you have to have written agreements with them. That is the number one place where things can go wonky. You may already have operating, agreement, by‑laws, partnership agreements, you want to definitely make sure you would get all those agreements in writing. Those should be updated and revisited on a regular basis as your relationship evolves and as you bring in more people into that business, more owners into the business. The second place I want to make sure that you have agreement are any time you have people who, like independent contractors, vendors, people like that who are creating things for your business, involved intellectual property. We’re talking about copyrights, trademarkable kinds of things.

Logos, websites, photographs, videos, blog posts, things like that. When people are creating creative works for your business, you want to make sure that you actually have rights over that stuff. You don’t necessarily automatically have the rights that you think you do. You will think that’s work for hire, a lot of times it’s not. You think it is, it’s not. It’s very rare that it’s automatically, works for hire. Unless they’re your employee, it doesn’t belong to you just because you pay for it. You want to make sure that’s clearly defined in a writing. It has to be in writing. It would have to be in writing to be, works for hire anyway, so you want to make sure that that’s in a contract and you know exactly what you’re getting.

The third area where you want to make sure you have contracts that are in writing are really when you have clients or customers that you’re not personally betting. What this comes up is, a lot of times when people start out in a business and they are providing a service, they start out with providing a service one‑on‑one. They are personally betting all their clients, customers, and it’s a very low drama because you’re personally selecting all these people you are doing the consulting work for, or the life coaching for, or who are testing out your products. As such, low drama, because you’re hand‑selecting everyone and you’re providing all the customer service. As you business grows, that changes at a certain point.

Either you’re not providing all the services, or you’re not hand‑selecting everybody anymore. At that point, then you’re going to need contracts to provide, to set those boundaries for you because you’re not going to be setting them yourself. You’re probably going to have staff, or website, or something that’s going to be bringing those people in, so you’re going to need everything to be provided in writing because you’re not going to be handling it yourself.

Those are three areas I want you to focus on as you’re going through your business looking for places where you need contracts. There’s a gazillion other places where you may need them, but those are the highest risk areas that I recommend you focus on when you’re thinking about places where you may want to use contracts as a tool for setting and enforcing boundaries in your business. Next time, tomorrow on Day 7, we’re going to move on to the third part of 10 Days, which is enforcing boundaries in your business. I’ll see you guys then. Bye.

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