What different types of contracts does your business have and use?
You probably have contracts with employees, clients, and potentially contractors who occasionally do work for you.
The thing with contracts is they come in various forms. From simple Terms of Service agreements to detailed and lengthy contracts, we accept them as an essential part of how we live and work.
And all that is fair enough. However, all contracts are not made equally, and most people who create contracts for others to sign can do far better at using them. Being better at using contracts starts with building trust.
Why is building trust important?
I am the first person to admit the merits of arguing that if there were such a thing as real trust, you would not need a contract! Alas, that is an argument for another day!
The role of a contract – no matter the context – is to set up the terms of reference and expectations for a working relationship. A well-executed contract is one that all parties enter in good faith and then do their best to hold up their end of the bargain. For that to happen, there needs to be mutual trust.
The vital thing to recognise is that you must build trust so that a contract becomes a formality. A contract itself should not be the foundation on which you establish trust!
Four steps to building trust with contracts
Most people have walked away from or turned down a job or business deal because of a problem agreeing on a contract. I know I certainly have. I have also been in a position where I have not been able to do business with someone because they thought the contract I proposed was unreasonable. On reflection, the people who believed that were often 100% correct!
Based on what I have learned from my own experiences and seen elsewhere, here are the four essential steps to building trust with your contract.
1. Cut the crap
A friend recently asked me if I knew what the below statement meant.
“The Consultant irrevocably appoints the Company to be its attorney in its name and on its behalf to execute documents, use the Consultant’s name and do all things which are necessary or desirable for the Company to obtain for itself or its nominee the full benefit of this clause.”
My first inclination was to paste it into Google because it was undoubtedly from a template, but it was not! The only result that appeared was this Quora answer, but that doesn’t necessarily shed any further light on it.
I had no idea what it meant myself, but apparently, it is something to do with intellectual property. Given this contract was related to a publishing role, that kind of makes sense. In plain English, the statement says the publisher has the right to use the writer's name to publish articles online and that the publisher owns the articles.
So why on earth does it not just say that?!
Cut the crap and build trust by keeping your contracts simple!
2. Hold the footnotes
We have all seen contracts with footnotes, pages and pages of appendices, and other references and citations.
If your contracts have these, you need to do better.
Put yourself in the shoes of the person to whom you are sending the contract. How will they feel about reading paragraphs of content referencing footnotes 1 – 4 or the need to use appendix A to interpret clauses a – d?
Not only are you potentially clouding the issue and preventing the building of trust, but you will scare off plenty of small business customers, too. How many small businesses do you think have a dedicated legal department? How many do you think want to spend from a probably tight budget to have a lawyer make sense of your labyrinth of legal jargon and footnotes for them?
The answer you are looking for is not very many!
3. Minimise the need to ask questions and seek clarifications
You need your contract signed, sealed, and delivered to start making money from it.
By minimising the need to ask questions and seek clarifications, you can pop the champagne and start listening to Stevie Wonder on your iPhone in double-quick time.
There are two elements to this point.
First, you need to remember that agreeing on a contract is a process of negotiation. If parties are having to spend time finding out what something means, not only is it not clear enough, but you are building suspicion between you rather than trust. You run the risk of investing time in a negotiation, but the longer it drags on, the higher the potential for one party to walk away.
Second, it is inevitable that some people and businesses will sign a contract without reading and understanding it. While that is not your fault, you still have the responsibility of providing clarity, eliminating ambiguity that may prompt questions later.
Be explicit, and use simple language, and your contracts will be brilliant – and trustworthy!
4. Use contract management tools to get the job done
Negotiating a contract might mean several stakeholders are viewing it, adding comments, and making revisions.
As someone who sometimes endures the tedium of merging changes and comments from multiple versions of the same document, trust me. There are more useful ways to spend your time!
This is crucial from a trust building perspective, too. Contracts might bounce back and forth several times before you sign-off on the final version. The last thing you want is queries that arise because people feel a change has been undone or a suggestion ignored.
That’s where using a contract management tool like Contractbook can help you add trust to your contracts. By working collaboratively, the negotiation of a contract is transparent on both sides. You can work together on necessary changes, and both see version history and the amendments made. Once agreed, the contract is stored in the cloud to refer to whenever necessary.
Of course, if you have followed principles 1 – 3, the negotiation process will be far easier, and you should not need to refer to the contract much, if at all, during your relationship!
Build trust, so your contracts simply become points of reference!
If you take the time to build trust with your contracts, the only time you will ever need to use it is to confirm and tie up loose ends at the end of a working relationship.
There is an adage that the best way to negotiate a contract is to think about how you want it to end. The best way to ensure a contract is executed brilliantly and ends well is to have so much trust in it that you never need to look at it.
Start using Contractbook for your contracts today, build trust in your contracts, and nurture better relationships across your business.