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The word contract brings to mind a long, legal document with vague clauses but that’s not the only kind out there. In this video, we are going to take a brief look at the different types of contracts and which ones can really protect us.
It's important to understand that contracts can come in various forms
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and you don't have to create a dreaded long document that's hard to understand.
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The most basic form of a contract is an oral agreement.
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An example of this is if you are assigned to a project over the phone and you agree to do it.
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This type of agreement is legally binding,
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but in cases of dispute, it's really hard to prove anything.
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Oral agreements could work if you have a longstanding relationship with the client,
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but almost always, written agreements are preferred.
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A letter of agreement or engagement is a second type of contract
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and one that's quite common because of its simplicity.
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This document includes a description of the project,
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what the client needs and by when,
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how the client uses the project, and how they should pay you.
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There can be additional terms, but at its simplest, that's what the letter of agreement covers.
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A combination of a project proposal and a quote is essentially a letter of agreement
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and forms a sufficient contract to start work,
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but it doesn't cover most of the clauses that offer you protection in case things get nasty.
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When working with larger clients, you may receive a purchase order, or PO,
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that both assigns your work to you and indicates payment for the work.
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This document can function as a contract and you will need to sign off on it before work can begin.
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Freelancers should be careful with such contracts.
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Since they are boilerplate documents that aren't customized to the work that you're doing and the parties involved,
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they tend to mostly protect the client and not you.
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Then, we have working contracts; working contracts are what we're used to seeing in terms of contracts—
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multipage documents full of legal language and plenty of clauses.
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These types of contracts usually come off as very intimidating and can cause a lot of friction if not executed properly.
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That's not to say that these contracts should be avoided—
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if you put together a working contract with clear, concise language
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that's devoid of any convoluted terminology, it can serve as a great tool for the project.
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These types of contracts tend to be more common with complex projects and large clients,
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or simply clients you have never worked with before.
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When creating contracts, the use of boilerplate contracts are okay,
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but care has to be taken to customize it to your needs.
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Boilerplate contracts are usually multipurpose and filled with generic terminology
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that apply to a wide range of projects.
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If you use a boilerplate contract to get started,
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make sure the document you end up with is mutually beneficial for both parties.
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