What you need to know about Contracts and Insurance

As a young entrepreneur, it is easy to get flummoxed about the “legal stuff” – so Vanessa Cullen, Director of Forward Thinking Design and winner of 2010 Anthill 30 under 30 winner; has put together a Contracts and Insurance 101 piece to help you get your head around it all….

Indemnity, Business Insurance, Contracts, IP and more

Service Contracts

• If you’re in a service industry get your service contract written by the best legal counsel you can afford.

Your professional association may be able to provide you with a basic pro-forma contract template but I’ve largely found these to be deficient when it comes to the reality of what people will try to get out of paying you for your services.

By all means, draft your own contract, using such pro-formas as a basis but do invest in submitting this to a solicitor who specialises in contractual law and has experience of your industry.

Their services certainly won’t be cheap but you’ll save so much more in the long run by having a good, solid, hole-proof contract upfront.

Who’s Signing the Contract?

• Ensure that the person signing (and named in) the contract is the same person responsible for paying you.

If anyone says they’ll be paying you on the behalf of the person who signed then get it in writing, with an acknowledgement that they’ve read the contract and understand that they’ll be held accountable for late payment.

Or, better still, reissue the contract in their name and have them sign. Ensure you’re contracting with an individual or company, not a trading name or false entity.

For large contracts you’d be well advised to conduct a background credit check on the client to ensure they have the capacity to pay versus a history of defaults.

Claiming Fees

• Aside from your fees, also include costs in your contract so you can be reimbursed for travel, printing etc. Make it very clear when payments fall due.

Ensure all parties can identify the end of a stage of delivery so there’s no later argument about when your services have been deemed to be completed, your involvement in the project is in order and the account should be settled.

Licensing Intellectual Property

• Include licensing arrangements in contract terms and conditions even if project is only proposed as a one-off.

You must limit the licence to use your IP or risk it being stolen and replicated.

An example of this for us is when we design one store but the client then decides to sell our design to franchisees to roll-out subsequent stores.

We have licencing arrangements with our clients that allow them the freedom to expand and franchise but which also ensure we receive a suitable return on the replication of our design.

Public Liability and Professional Indemnity Insurance
• You must get public liability insurance and professional indemnity insurance. You’d have to be crazy to run a business without protecting yourself from litigation.

Read the paperwork carefully and ensure you’re properly covered.

Business Insurance
• I also recommend you get business insurance to protect your business from costly interruption and to protect your assets.

Be careful to enquire about ‘add on’ covers.

These are items that you’d think would be covered in the general business insurance but which your insurer has decided (in their infinite wisdom) to make separate options.

We got stung one year by not realising that business items in a business vehicle were not insured because we didn’t realise it was a separate ‘option’.

When items were stolen from a vehicle, we found we had no cover. Business items on your person or in your vehicle may not be automatically covered. Read the PDS in great detail.

Purchase Records

• Record all conversations with insurers and suppliers at purchase time, they often do and you should too. This protects you from errors in their sales process that may be difficult to prove later on.

We hope this helped!