Contracts and Negotiation: What You Don’t Know Can Hurt You

Contracts and Negotiation

by Julie Knight

Independent business communicators are typically great with words, so long as they aren’t legal words.

For those who feel that a Berlitz language course should be created to help us understand “legalese,” let us introduce to you Sandy Shephard, Esq., president and founder of Good Solutions, a legal and business consulting firm.

Sandy’s experience includes working with the business affairs department at LucasArts Entertainment; as legal counsel for Mindscape / Broderbund; and legal director for The Learning Company during its $3.5 billion acquisition by Mattel.

She’s negotiated small to multi-million dollar deals worldwide, including securing licenses for Tom Clancy, Stephen King, Beatrix Potter and a company you may have heard of: Google.

We asked Sandy to share her top three tips for negotiating business contracts. Here’s what she offered:

Tip 1: Get an agreement on paper.

This may seem obvious, but often in the excitement of landing a new client, a consultant will make legal mistakes that could come back and bite them down the road. Too many deals are made with just a handshake in this honeymoon phase. You don’t want to bog things down with legalities, except—yes, you do!

You may think you can “trust” this client; they may even be a longtime friend. The biggest knots I generally need to untangle are “friend / no contract” situations. It boils down to this: get a contract.

It’s certainly a good idea to clarify what you’re getting into and have it all written down to protect yourself from potential misunderstandings and disputes.

Tip 2: Don’t borrow a contract from a former employer or client, or use a client’s boilerplate contract without legal review.

Usually people have no idea what they’ve given away—or are responsible for—in a contract.

If your template contract was put together from pieces garnered from an old employer or friend who got it from a friend, you could

a) be infringing on the copyright of the original contract (you didn’t think of that, did you?)

and

b) unwittingly using “legalese” that could actually get you in trouble.

Because legalese is generally not “one size fits all.” It’s usually written with specific circumstances in mind.

Let’s say that you have signed your client’s contract that contains “work for hire” language. What does that mean? It means your client owns whatever you have done for them.

How broad is the language in that contract? Do they just own an “accepted deliverable” from you, or do they own your “ideas, notes, etc.?” Or even “everything you produce during the time you work for them?” Even the narrowest work-for-hire language usually doesn’t have a provision that your client must “pay to own.” This is one of the basic changes that should be made if you are the party getting paid, even if, in the end, the client does own your work product.

Don’t forget: if there isn’t a provision in the contract to protect work you had done before, that means if you reuse something you might consider “your stuff” (which they actually now own), you are an “infringer” of what is now their “intellectual property.”

How do you remedy this? Give them a license to what you do, a license that’s broad enough to make them comfortable but covers your assets. I have clients who thought they were designing a logo or giving over a photograph for one use, but by signing a work-for-hire contract, they lost all control over what was done with that deliverable.

Tip 3: Include a loophole to protect yourself from situations out of your control.

Including a “force majeure” or “Act of God” clause is usually recommended. This is a paragraph stating that if something out of your control or out of your client’s control happens, the party stricken by this “Act of God” (yes, that’s a legal term, even if you are an atheist) gets some breathing room until the situation is rectified.

How can this affect you?

I remember when working for Lucasfilm, the Loma Prieta earthquake hit one of their facilities in Los Angeles. All legal hands were on deck, scrambling to find a “force majeure” clause in all client contracts. Otherwise, they would still need to produce their deliverables on schedule, as promised, from their squashed facility.

If you are a contractor, make sure there is some language of this type to protect you.

Need legal counsel? You can contact Sandy Shephard, Esq. at sandy@goodsolutions.com or reach out to her on LinkedIn.

Julie Knight is an award-winning, accredited business communicator and freelance writer. Her clients have included The Walt Disney Corp., Starbucks, Cisco Systems, McKesson Corporation and Hewlett-Packard to name a few.

Comments

  1. It is important when negotiating a contract to have legal counsel on your side. Great information, thanks for sharing!

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