The Importance of Contracts in Business
For any person who contracts his or her own work out this article is a must read because it reminds you to protect yourself and know your rights.
The other day I witnessed a situation whereby one person intentionally took advantage of another person and this second person allowed the taking to occur most likely due to a lack of self-confidence. This situation reminded me of a similar interaction I had with a neighbor. A couple of years ago here in California, a middle-aged man who lives in the house behind the one I live in hired me to edit and layout his book manuscript. His book was on how to make money in the stock market. He lives in a million dollar home, owns three Porsches, and apparently makes a lot of money. Before our business exchange we had never spoken with each other just because we were not aware of one another.
When I initially sat down with him in his French castle and reviewed his notes for his book I offered him several suggests on how I could edit it and lay it out, getting it print ready. He was very pleasant to deal with and agreed to my suggestions. He also let me know what he wanted and I agreed to do what he wanted done to his manuscript. I wrote up an invoice that included the project work I was to do and it also included the price of the job: approximately $1600 dollars. I requested half the money up front. Although he was reluctant to give me a down payment, he did. I should have clued into his money issues then but he was very charming that I overlooked my intuition.
To make a long story short, I worked more hours on his project than I originally quoted him for and I finished the project on time. I didn’t charge him extra for my extra time and care. He was a neighbor after all and neighbors help each other out, so I thought. A day after I excitedly dropped off a printed proof copy of his book he emailed me a nasty letter. He said that what I did to his book was immoral and that what I did was not authorized by him and that he wasn’t going to pay me the rest of the money until I got it right. Reading his email I couldn’t believe my eyes. I thought: Was this the same nice gentleman I spoke to initially? Maybe somebody else is using his email.
I took a few deep breaths and emailed me him back politely reminding him of the contract he agreed to and of our initial conversation. I reiterated that I did exactly what he wanted me to and that I was confused by his new change of mind.
The neighbor emailed me back with a long list of changes he wanted to the book, as though our first meeting was non-existant. In a nutshell, he wanted completely different editing and a completely different layout than what he initially instructed me to do. The whole project had to be done over from scratch.
I emailed him back letting him know that if he wanted me to do all of this new work that would take me days to do he’d have to pay me for it. I also let him know that I wouldn’t change his project every time he decided to change his mind unless he also wanted to buy my time. I had to put my foot down. I could see that he was engaging in a control tactic that would take over my energy and time. In psychology, we refer to these people as ‘œenergy vampires.’
He emailed me back telling me that I was an awful person and he went on and on making personal attacks on my character. In addition, he said he was going to go to church and pray for me because I was such a bad person. When I let my partner read his manipulative emails she was flabbergasted. She knew the long hours I put into his project and the great care I treated it with. Like me, she couldn’t understand where his seemingly pathological behavior was coming from. Then he sent another email to me threatening that unless I fixed his manuscript he was going to call Immigration because I am Canadian and shouldn’t be working in America. That threat triggered the warrior archetype in me. I was not going to let him control me out of fear. I emailed him back saying: ‘œI have my own company registered in Canada and I can sell my products and services all over the world. In addition, I am married to an American. Moreover, I have just sued you for the remaining balance that you owe me in the amount of: $800 dollars. See you in court.’
I took it upon myself to file a small claims lawsuit with the Orange County Court System. It cost me all of $32. My partner served him the papers. As I waited for the court date I learned from other neighbors that this particular neighbor is known for taking advantage of workers that he thinks he can get away with, such as illegal Mexicans who he hires to do his gardening and then he doesn’t pay them. In my situation, he perceived me as the ‘œweak Canadian girl next door’.
On the day of the court case and as we both sat in the court room on opposing sides waiting for the case to be heard the bailiff served me with a lawsuit from the neighbor. He was counter-suing me for $3000 dollars for destroying his manuscript. When the judge called the case and both him and I stood in front of her she asked me if I wanted to reschedule considering I was just countersued and may need time to prepare my defense. I told her that I wanted to clear the matter up right now. In the end, since I had my contract that he agreed to and since I had a copy of the work I did which matched the agreement, I won, and his frivolous countersuit was denied. As I recall, the judge and even bailiff kept rolling their eyes at him because they could easily see right through his warped story.
I hope I never need to sue anyone again especially for $800 dollars, such a small amount of money really. For me, going to court over this matter with my neighbor was more about standing up for myself with confidence. I was not going to let him take advantage of the ‘œweak Canadian girl next door.’
After the judgment was rendered I had to keep pressing him to pay me. I mailed him letters letting him know that if he didn’t pay the judgment I’d take him back to court where he’d have to show his accounting books and be subjected to an $800 dollar lean on his million dollar home. He returned the letters unopened with the words ‘œHe doesn’t live here anymore,’ on the envelope. As if he didn’t live in the house behind mine anymore, I jogged passed him every morning while he walked his dog. Eventually, after much persistence on my part, he got the message that I was serious about getting my payment from him so he mailed me a check and that was that. I hope he learned his lesson of never to take advantage of another person as that next person he cheats may just stand up to him like I did.
For me, doing SMART BUSINESS means having all my ducks in order and that includes a mutually agreed upon and signed contract between me and the client and to never put my guard down’”even for a neighbor. As Donald Trump says: ‘œIt’s nothing personal, it’s just business.’
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For more information on Dr. Lana Marconi’s private therapy practice in the Orange County, California area, and to download her self-help books visit: www.drlana.com.
Photo credit: stock.xchng.
You are absolutely right on this one, though a contract won’t always protect you. I was once stiffed by a client under very similar circumstances as what you described. In the beginning, he loved my work, during the project, he loved my work. Then, at the end, right when he was supposed to pay, he started finding fault with everything I did. He never paid, I sent a collection agency after him and eventually I sued and won. I was never able to collect anything because he filed for bankruptcy. I found out, years later, the reason he was finding fault with my work was because he was hugely in debt and trying to figure out a way NOT to pay his vendors.
Word to the wise: Sign a contract AND get your money up front.
I think stories like this, tempered with advice and specifics on how to avoid similar situations (a lessons learned approach) are some of the best learning tools out there, short actual experience. Not advice, but actual experiences of what went wrong and why…
Can you tell us more about the case you opened with…what you saw?
The devil is in the details. If you think about it corporations would NEVER do business without a contract so why should you or I as a business owner? I don’t have heavy doorstops as contracts, but I do have clear statement of work and payment arrangements. It isn’t personal it is just clear communication and setting expectations.
Thanks for sharing your story. I bet you laugh about it now & kudos to you for taking a stand for you and your valuable work.
Great post, Lana. Contracts are an absolute must. At the very least there needs to be a signed letter of agreement that details what is going to be done and how much you are going to get paid. Paula’s right – a big corporation would never proceed without a contract, so why should a small business?
Lana: Many freelancers feel insecure about asking for partial payment up front, but this is an important step in running a small business.
As Suze Orman explains don’t put yourself on sale. Make it the payment policy of your business… this technique removes yourself from the equation. Contracts and down payments are just how you do business!