“Vena, she stopped taking my calls! And when I sent my invoice to her address, it was returned to me with a note that the receiver was not found at that address! What shall I do? She owes me a lot of money. We have a contract, but…”
This was the frantic call I received from a friend just the other day. Apparently, one of her clients ghosted her.
The problem was my friend delivered her end of the contract, but the client failed to pay when the payment fell due.
And now she can no longer be found.
Oh, what a dilemma!
You might have noticed that they even have a contract. So, how did this legal problem happen?
One thing to remember: It is not enough that you have a contract; it is not enough to have the correct provisions.
So here is the deal.
Contracts and Agreements need to follow certain formalities. And these formalities are there for a reason. I know, I know, lawyers want to make things more difficult. But I promise that there is a darn good reason for these formalities.
If you don’t follow these formalities, your contract may not be enforceable or difficult for you to enforce it. When we say that you cannot enforce the contract, it just means that you cannot force the other party to do what the contract asks.
There are three formalities that you need to remember and observe:
1. Double-check the parties to the contract. You need the correct legal name and address, especially if you are not paid outright.
If it is a company you are dealing with, ensure that the company is named as a party and represented in the contract by the correct authorized person. If it is an individual, double-check that individual’s identity. It is not abnormal to ask for proof of identity like a government-issued ID! This will help you run after the person if you are not paid!
2. Send your contract before you ask for payment. The other party must be able to read your contract and agree to be bound before you ask for payment. If it is done the other way around, the other party can use it as a defense that they paid the transaction without knowing your terms.
3. Ensure your contract allows electronic signatures and that you collect legally binding signatures. What do I mean? Most business owners normally send a document by email and then ask the other party to sign it. While some countries allow signing documents like this, it is difficult to prove the signature’s authenticity in case issues arise.
For example, you cannot prove when the signature was placed on the document. Was it the owner of the signature who signed it? Of course, there is no way for you to know unless you saw them sign personally.
Hence, you must use a software that collects signatures legally.
More importantly, the software should be compliant with Data Protection Laws!
I am currently using PandaDocs, and if you want to have reliable e-signature software, I highly recommend them.
Returning to my friend, she forgot the first and the third formality. As to how she was able to resolve this issue, this will be the topic of another article.
So there you have it. The three things to check before sending a contract to your client. This will ensure that what you are sending is actually enforceable.
These things may seem tedious. But I promise it will not take you long to check and do these things. But it can save you and your business from many legal issues (and tears!)
Do you want questions? Let me know in the comments.