Is an Electronically Signed Contract Valid?

In today’s office talk, I’m going to be answering a question that has come up a few times during my workshops and webinars,. The question has to do with contracts and electronic signatures – more specifically is an electronically signed contract valid?

Watch the video to find out.  In this video, we'll cover:

  • Is an electronic signature valid? (1:27)
  • What is an electronic signature? (2:25)
  • Can e-signatures be used for all documents? (3:07)
  • One more tip (04:33)

That's probably more than you've ever wanted to know about electronic signatures. {wink}


 

 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.


How One Sentence in a Contract Can Cost You a Business Client

Imagine that you’ve been in talks with a potential client for weeks about having you come on board to plan an event for their company.  You and your client are totally on the same page and are looking forward to planning an epic event unlike anything the company has ever seen. Initial talks suggest that professional acrobats might even be involved {wink}. You send over your contract for services to your client for review, which states:

Both the signed Agreement and the non-refundable deposit must be received in order to book Planner’s services.  This Agreement is an offer that must be accepted by December 5, 2015 by returning the signed Agreement and paying the non-refundable deposit, or the offer shall expire.

The client signs and sends you the contract, and says the check for the deposit is in the mail.  In the meantime, she sends you a few documents to review to get started because the event is just around the corner.  Wanting to impress the client, you don’t wait to receive the deposit and get to researching vendors for the event.

As of December 6th, 2015, you still haven’t been paid the non-refundable deposit. On December 7th, the Client tells you that the event has been cancelled due to budget cuts and they will no longer need your service.  You gracefully remind the Client that the deposit payment is still outstanding.  She says she doesn’t owe you anything because there was never an agreement between you two.

Whaaaaaaaaat?

Photo by  Anchor & Flourish .

You have a signed and written agreement from your Client in your hands. Clearly she’s making a mistake.  Not to mention that you’ve been putting time on the event, and have even turned down other work so you could plan this event for the Client.  

Clearly she’s mistaken…. Right?

Nope.  

This exact scenario happened to someone I know and I don’t want it to happen to you. 

So here’s the deal:

To have a legally binding contract, the following elements must exist: an offer, acceptance of the offer, consideration, a writing (sometimes), and competence.  Assuming the last three elements exists, where you fall into trouble here is that you’re missing an acceptance to the offer.

(Although there may be an argument that there was an oral contract or an implied contract, let’s just focus on whether you two had a valid written agreement.)

Let’s take a closer look at the contract.

The contract states that in order for a client to book your services, the client must send you: (1) a signed agreement and (2) the deposit and (3) both of which must be received by December 5, 2015.  This is your “offer” - a proposal to enter into an agreement that is communicated to the Client.  If these required conditions – sending the signed agreement and the deposit don’t take place before December 5, 2015, your offer is no longer “on the table.”  Because your client didn’t return the signed contract AND the deposit BY December 5th, there was no agreement.  

So what’s the takeaway?

If you’re going to phrase your contract like the example above and make the offer conditioned on the performance of certain actions by a certain date, don’t start working until the Client has performed those conditions. This may be difficult to do at times, especially when the Client wants you to get started right away on a time-sensitive project, but just know that unless the conditions are met, there is an argument that no contract was ever made.   Then you’ve just run the risk of having done work for a client who refuses to pay you for your services. 

Another approach is to phrase your contract so that agreement becomes effective upon the date the parties sign the contract, but then provides that you won’t begin working until you’ve received the non-refundable deposit from the Client. In this example, the agreement is formed when both parties sign the contract. However, it clarifies that your performance of the contract is conditioned upon receipt of the initial payment from the client.

Tell me – Leave a comment below and let me know what are some lessons you’ve learned when it comes to handling contracts for your business? 


 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.


 

What to Expect When You Take Your Case to Small Claims Court

You’ve decided that the way to recovering unpaid fees from your client is to file a case in small claims court. Here’s what to expect and how to prepare for your day in court.

FILING YOUR CASE

Each state has different instructions and requirements for filing a small claims case – all of which can be found on the state court’s website or by visiting the court clerk’s office.  To file a claim, you will need to complete a court-provided form (referred to as a “complaint”) that identifies the parties and their addresses, your claim against the defendant, and the amount you allege that the defendant owes you. Remember, the amount you allege that is owed to you must fall within the court’s requirements, which can range from $2,500-$25,000 based on the state in which you’re filing your complaint. Once completed, you must file complaint with the court clerk and pay a small filing fee. The court clerk will then issue a hearing date for when your case will be heard by the judge.

A copy of the complaint and a summons must then be properly served upon the defendant or the action will be dismissed. In some states a deputy sheriff or a process server must personally serve a small claims court summons and complaint for a small fee. In many states, however, service can be accomplished by mailing a copy of the complaint to the defendant.

Once the defendant is served with the summons and complaint, he/she will be on notice that a hearing has been scheduled on the matter. The defendant then has an opportunity to file a counterclaim against you arising out of the same dispute.

BEFORE THE HEARING

If possible, visit the courtroom in advance and observe other cases. Doing so will prepare you for what to expect at your hearing.

In preparation of your hearing, compile all of your evidence including contracts, invoices, receipts, email communications, and other supporting documentation demonstrating that the defendant owes you the money you claim is due. If the defendant has filed a counterclaim against you, gather your evidence and thoughts so you can rebut the defendant’s claims. It is recommended that you make two additional copies of any material you intend to rely on – one for the judge and the second for the defendant. Most judges will require that the defendant have an opportunity to review any material you submit to the judge.

Get all of your facts in order and rehearse what you will say to the judge at the hearing. Know exactly what it is you want to get out of the suit. Court dockets are quite busy and you may only have a few minutes to make your case.

AT THE HEARING

On the day of your hearing, make sure to dress in a professional and respectable manner. Arrive early and check in with the courtroom clerk or bailiff.

Before calling your case, some judges require the parties to attempt to settle the case on their own and therefore order all the parties into the court hallway to discuss further. If your settlements attempts are futile, then you return to the courtroom and wait for you case to be called.

When your case is called, walk up to the designated areas before the judge. Usually, there are signs indicating where the Plaintiff and Defendant should stand. When asked by the judge, present your case and answer any questions he/she might have. Stay focused on the facts and issues of the case and keep your emotions in check. Always address the defendant, the judge, and court staff with respect.

AFTER THE HEARING

You may have to wait a few weeks before the judge issues a decision about your case. Depending on the outcome of the case, the losing party may have an opportunity to appeal the judge’s decision. Assuming you won your case and the defendant does not appeal the decision, the next step is to collect your fees. Hopefully the defendant will comply with the judgment and pay you. But if the defendant refuses to pay, you’ll need to take steps to collect on the judgment. A court can enter an order authorizing the sheriff to serve a writ of execution on the losing party. This writ permits the sheriff to seize and sell assets to pay the judgment.

Unfortunately, sometimes business relationships go south. That’s why it’s important to have a contract that clearly spells out each party’s rights and obligations. With a contract in place and an understanding of the available dispute resolution processes, you’ll be better positioned to protect your business should a conflict with a client arise.

This article was originally written for and published on Sage Wedding Pros which is dedicated to creating financial and operationally sustainable businesses in the wedding and events industries. 


 

 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.


Mediation, Arbitration, Litigation, OH MY! What is the Best Option for Me if a Client Doesn’t Pay?

Contracts generally include a clause providing how the parties will resolve conflicts. There are three main ways in which disputes are resolved – mediation, arbitration, and litigation. Before drafting this clause in your own contracts, do your research and think carefully about the time, cost, and rights associated with each dispute resolution option.

MEDIATION

Mediation involves the parties meeting with an agreed upon neutral, third party (i.e. a mediator).   A mediator does not judge the case and does not provide interpretations of the law. Rather, the mediator facilitates communications so the parties arrive at a mutually acceptable solution to the dispute. As a less formal process for resolving disputes, mediation does not require that the parties comply with strict procedural and evidentiary rules. The goal instead is for parties to resolve the disputes between themselves. Although the parties can agree to be bound by the agreement reached through mediation, mediations are not necessarily binding on the parties.

Among its benefits, mediation is less costly than litigation. It does not require representation by an attorney and without the formal procedural and evidentiary rules in place, it can save a lot of money on court and lawyer fees. Mediation also proceeds much faster than litigation. It can be scheduled as it suits the parties needs, rather than waiting for your “day in court” which is progressively taking longer due to backlogged court dockets. Mediation is also less contentious than litigation. The neutrality of the mediator and the more relaxed environment creates a setting where parties are less hostile and adversarial. However, since the mediator is not in a position to make decisions, your effort might be futile if the parties become deadlocked in their negotiations.

ARBITRATION

With arbitration, the parties choose an arbitrator or set of arbitrators – who are usually retired judges or lawyers with specialized knowledge about the topic in dispute. The arbitrator(s) will review the case presented by the parties and issue a decision, much like a judge would in court. It is a more simplified process than trial, with arbitrators having more flexibility than judges on how to conduct the process and what weight to give to evidence. Arbitration can either be voluntary or mandatory, and the arbitrator’s decision can be binding (i.e. irreversible) or non-binding (i.e. reversible) – which can be agreed upon in advance in your contract. If arbitration is mandatory and binding, the parties are essentially waiving their rights to a court proceeding. Like mediation, arbitration is usually cheaper and faster than going to court, but the cost of hiring arbitrators can add up. If an arbitrator’s decision is binding, a party will have limited recourse to overturn it.

LITIGATION

Filing a lawsuit in court is the option most people think of when a dispute arises. However, many courts are so backlogged with cases that pursuing litigation can prove to be a very long process. Not to mention, litigation can also be quite costly, as you will likely need to hire an attorney to handle your case.   The delay and cost associated with having disputes resolved in court encourages parties to explore other forms of dispute resolution like mediation and arbitration.

Small claims court is a legal court of law designed to resolve disputes involving small amounts of money in an expeditious manner. The amounts vary by state, but range between $2,500-$25,000. If your claim falls within the prescribed amount, then pursuing your case in small claims court is an option.   If you do so, you must be prepared to attend the hearing and present your case to the judge as most small claims courts do not allow you to be represented by a lawyer. Fortunately, the procedural and evidentiary rules are simplified. After the parties present their case, the judge will issue a decision, which may or may not be appealed.

WHAT'S RIGHT FOR YOU

Before drafting your contracts, do your research and think carefully of how you will want to resolve any potential disputes with a client. Ask yourself the following questions:

  • How much will it cost to get the dispute resolved? Consider the cost of hiring a mediator, arbitrator, lawyer, court fees, travel, and/or time spent away from work and on this matter.
  • How much am I seeking to recover from my client?
  • How long will it take for us to have this dispute resolved?
  • Do I need to hire a lawyer to represent me and/or understand my legal rights?
  • What are the facts at hand and do I have strong evidence support my claim?

In the third and final post in this series, we’ll discuss what to expect when you take your case to small claims court.

This article was originally written for and published on Sage Wedding Pros which is dedicated to creating financial and operationally sustainable businesses in the wedding and events industries. 


 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.


Your Legal Rights When a Client Won't Pay

You’ve worked hard completing a project for your client. The work has been done and you now find yourself chasing down your client to pay the balance owed for your services or to reimburse you for agreed upon expenses.

This three part series addresses how to minimize the risk of this happening to you and what options are available should you find yourself in this situation:

  • Because the available remedies are largely governed by the contract you entered into with your client, part one of the series discusses what contract terms and practices minimize the risk of ending up with a nonpaying client.

  • Part two discusses the three dispute resolution options most often included in contracts that will impact how you go about recovering unpaid fees.

  • And finally, part three addresses how to prepare to take a nonpaying client to small claims court to recover your fees.

It is imperative to have a written contract before you begin working with a client. Not only does a contract help clarify expectations between you and your client, but in the event of a disagreement, a judge is more likely to uphold an agreement if it is in writing.

Here are a few terms that should be included in your contracts:

PAYMENT TERMS & SCHEDULES

It is important to make your payment processes and expectations clear in your contract. Some people require an initial deposit before commencing any work, but then have trouble collecting the outstanding balance upon completion of the job.  One solution is to not only request the initial deposit, but to outline a billing schedule in the contract. Instead of billing the entire balance at the end of the project, divide your fees into a payment schedule and distribute the payments into several invoices, with the final payment of your fees due before the work is delivered. For each portion of the work you provide, send an invoice and indicate to the client that you will move forward with the work only if the invoice is paid in full.

Also, your contract and your invoices should clearly indicate the deadline for when invoices must be paid (for example, within 15 business days of receipt of an invoice).

Be diligent about sending your invoices at the predetermined schedule and implement a process to streamline this for you. Sending timely invoices and following up on overdue payments communicates that you are a professional and you expect to be paid in a timely manner for your services.

LATE FEES FOR OVERDUE PAYMENTS

One method for incentivizing timely payments is to include a late fees clause in the contract. Although the maximum interest rate that is permitted varies by state, this clause may encourage a client from paying you on time so as to avoid the interest charge or late fee. Another option for incentivizing payment on an outstanding invoice is to offer a discount for paying on time. For example, the client can receive 1.5% discount if the invoice is paid within 10 business days. Again, indicate that all work will cease until outstanding payments, including any late fees, are received.

DOCUMENT WHAT EXPENSES WILL BE REIMBURSED

If you anticipate incurring out-of-pocket expenses related to the work  that are not already accounted for in your fees, make sure your contract clearly outlines what specific expenses will be reimbursed by the client. As in the case of your service fees, indicate how those expenses will be invoiced and when such reimbursements will be due.

Despite having reimbursable expenses identified in your contract, it’s also a good practice to run all purchases by your client before personally incurring the cost. Better yet, have your client pay for the expense directly so you can avoid invoicing and waiting for reimbursement.

A FEW MORE TIPS

If you’re having trouble collecting your fees from a client even though you have a solid contract in place, here are few more tips on how to address the situation with your client:

  • Periodically send copies of outstanding invoices to the client via email and U.S. mail and follow up with a phone call if necessary.

  • Send your client a cordial, but firm letter outlining the terms of your contract and their responsibility to pay you. Enclose copies of your contract, invoices, receipts, and other supporting documents and state a deadline for receiving payment.

  • Sometimes a client withholds payment because they are dissatisfied with your service in some way. Use this as an opportunity to address their concerns and to provide better customer service.

  • If you’re making little progress, then work with a lawyer who can send a strongly worded demand letter to the client and/or help you pursue other remedies.

Despite taking all these measures, sometimes a client will still fail to pay. Assuming you want to pursue the matter further, the next post in the series will discuss the three most common dispute resolution options: mediation, arbitration, and litigation.

This post was adapted from an article originally written for and published on Sage Wedding Pros which is dedicated to creating financial and operationally sustainable businesses in the wedding and events industries. 

Photography by Paper Ban Studios.


 

 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.

 

 

contract-review-drafting.jpg

5 Mistakes to Avoid With Your Contracts

I've had the opportunity to work with many small business owners and while some people have their legal game in order when it comes to contracts, there are others who well, let's just say need a crash course in contracts.  Here are the top five common mistakes I see small business owners make with their contracts.

1.         NOT PUTTING ANYTHING IN WRITING.   

It makes me cringe every time I hear a creative professional entering into a new business relationship WITHOUT a contract.  At the most basic level, one of the major benefits of having a contract is that it helps clarifies expectations between the parties and avoid any misunderstandings.  For example, if Jim and Jane agree that Jim will paint Jane’s house for $500  - at first glance, this seems clear enough.  But when we dig in deeper, we realize, there are still a lot of unknowns. For example, who is responsible for purchasing the paint and supplies? Is that included in the $500 cost? When will the work be completed? Will Jim be painting the inside or the outside of the house or both?  Having a contract creates a platform to think through and clarify these terms so as to avoid any problems in the future.   

Also, in the event the relationship goes south, (and unfortunately, they often do), a document that clearly spells out each  party's rights and obligations can be huge a lifesaver in the case of confusion or disagreement.  Memories fade and often times we can't remember what we agreed to years before.  

Although in some circumstances oral contracts can be valid, they are more difficult to prove in the event that you’re ever standing before a small claims court judge.  My experience has been that a judge will be very reluctant to uphold an agreement that isn’t it writing. 

So the lesson here is get your agreements in writing!

2.     COPYING AND PASTING FROM A CONTRACT
YOU FOUND ON THE INTERNET.

Ah – the infamous copy and paste approach to contract drafting. We know it all too well.  You have sent out a client proposal and the client wants to move forward and has asked you to send the contract over ASAP.   Sheer panic begins to set in because you think “holy moly, I don’t have one and I don’t have any lawyers on speed dial who can help. I can’t afford to lose this client!”

My recommendation is to have a set of contracts on hand for when the need arises.  Whether you purchase a set of template contracts or have one customer tailored for you, having your contracts ready to go will save you a lot of time, frustration, and that client!   

3.          NOT READING A CONTRACT

I know, I know… who reads the fine print, right?  You’d much rather be focused on creating that lovely thing of yours than trying to decipher those legal terms – which might as well read like hieroglyphics.  But you're working hard to build your business. Don't be lazy when it comes to the legal stuff. 

4.          SIGNING A CONTRACT WITHOUT UNDERSTANDING IT

A close runner up to mistake #3, is reading a contract, not understanding it, but signing it anyway.  As you can tell, I’m an advocate of having a basic legal understanding of the terms of a contract.  Find someone who can explain the terms to you.  You may not know what rights you're giving up or what obligations you're agreeing to undertake.

5.          FAILING TO NEGOTIATE TERMS THEY DON'T LIKE.

All contracts are NEGOTIABLE. Just because someone hands you an official looking form and asks you to sign it, it doesn’t mean you have to under the terms they’ve given you.  Albeit, there are some contracts that are really difficult to negotiate.  (Ever try to negotiate the terms of a contract of a bank loan? You may not be very successful getting them to budge!)  But if a term doesn't float your boat, know that you can at least attempt to negotiate it. 

So tell me in the comments below - are you guilty of making any of these mistakes? If so, what are you going to do to fix it?


 

ARE YOUR BUSINESS CONTRACTS UP TO SNUFF?

Here are just some of the ways we can fix that.