Different Types of Contracts

It's important to understand that contracts can come in various forms 0:00 and you don't have to create a dreaded long document that's hard to understand. 0:03 The most basic form of a contract is an oral agreement. 0:09 An example of this is if you are assigned to a project over the phone and you agree to do it. 0:12 This type of agreement is legally binding, 0:16 but in cases of dispute, it's really hard to prove anything. 0:19 Oral agreements could work if you have a longstanding relationship with the client, 0:22 but almost always, written agreements are preferred. 0:26 A letter of agreement or engagement is a second type of contract 0:30 and one that's quite common because of its simplicity. 0:33 This document includes a description of the project, 0:37 what the client needs and by when, 0:39 how the client uses the project, and how they should pay you. 0:41 There can be additional terms, but at its simplest, that's what the letter of agreement covers. 0:45 A combination of a project proposal and a quote is essentially a letter of agreement 0:49 and forms a sufficient contract to start work, 0:54 but it doesn't cover most of the clauses that offer you protection in case things get nasty. 0:57 When working with larger clients, you may receive a purchase order, or PO, 1:03 that both assigns your work to you and indicates payment for the work. 1:07 This document can function as a contract and you will need to sign off on it before work can begin. 1:11 Freelancers should be careful with such contracts. 1:17 Since they are boilerplate documents that aren't customized to the work that you're doing and the parties involved, 1:20 they tend to mostly protect the client and not you. 1:25 Then, we have working contracts; working contracts are what we're used to seeing in terms of contracts— 1:29 multipage documents full of legal language and plenty of clauses. 1:35 These types of contracts usually come off as very intimidating and can cause a lot of friction if not executed properly. 1:39 That's not to say that these contracts should be avoided— 1:46 if you put together a working contract with clear, concise language 1:49 that's devoid of any convoluted terminology, it can serve as a great tool for the project. 1:52 These types of contracts tend to be more common with complex projects and large clients, 1:58 or simply clients you have never worked with before. 2:03 When creating contracts, the use of boilerplate contracts are okay, 2:06 but care has to be taken to customize it to your needs. 2:10 Boilerplate contracts are usually multipurpose and filled with generic terminology 2:13 that apply to a wide range of projects. 2:18 If you use a boilerplate contract to get started, 2:21 make sure the document you end up with is mutually beneficial for both parties. 2:23