4 Types of Contracts You Should Be Using in Your Online Business
I’m always saying that it’s better to be a proactive business owner than a reactive one and that means using contracts for everything in your business. Not just any contract, it is important to have a lawyer-drafted contract.
This blog post will cover the 4 types of contracts you should be using in your business. Of course, there can always be situations where you may need another specialty contract as well, but if you’re an online business owner, these are really what you’ll need as you start, grow, and scale your business! It may seem like a lot but that’s because as our business grows, so do our relationships!
We hire, we create affiliate systems, we have podcasts, we create passive products, we work with other business owners… and on and on. All this growth requires additional contracts (or contract templates).
Why do I need to use a contract for my business?
I have a blog post with this exact title that covers everything you need to know about why you need to use a contract whether you are a brick and mortar business owner or an online service-based business (such as a coach or service provider).
Now, here’s a little bit of tough love:
Spending money on anything else over your contracts is honestly just not a CEO move.
There’s no shame if you didn’t know how important they are until you’re reading this right now, but if you don’t have lawyer-drafted contracts, please add it to the top of your priority list! Not only do contracts help make you look more professional and trustworthy, but they help set expectations, create boundaries, protect your intellectual property, cultivate a safe space for clients to share information with you about their business and vice versa, and SO much more.
Honestly, most of the problems I see when people come to me with a dispute is that they either did not use a contract at all, or they did not use a good contract from a lawyer that actually said what they needed it to say.
I could list 20+ more reasons, but you can learn why you need to use a contract for your business in this blog post.
4 types of business contracts you need (with specific examples of each):
1. Client Contracts
Client Contracts. These types of business contracts set expectations and boundaries, payment terms, refunds, intellectual property, disclaimers, and more. Examples of using this type of contract include 1:1 Client Contracts, Service Agreements, and contracts for Group Coaching. If you are offering services or taking coaching clients, this contract should be your FIRST priority as a business owner (yes, your 1st priority, not just your 1st legal priority - it’s really that important).
What could go wrong? Refund requests, missed payments, and terminating the contract are the biggest issues I see when it comes to client contracts. Most of it comes from not being clear or specific enough in your contract which then causes miscommunication and a breakdown in the relationship. Do you only provide support M-F from 9-5pm EST? That should be in your contract. Is another coach doing some of the coaching and not you? That should be in your contract.
Digital Product Terms and Conditions. This is a type of checkbox contract used for passive offers or lower ticket items. You can insert this at checkout for the buyer to agree to by checking a box (or reading a paragraph or clickable link depending on your checkout page software). This is especially important for the intellectual property license that you’re providing here through the checkbox.
What could go wrong? Intellectual property is one of the biggest reasons for using this type of contract. You’re providing a license to use your digital product through this checkbox (likely for educational use or their own personal use). Not using this contract when you’re selling digital products means there are no clear terms - are they getting actual ownership of your digital product (your intellectual property) for them to do whatever they want with it, like re-sell and share it themselves? Don’t not use this and wait until someone steals your stuff to do something about it.
Membership Terms and Conditions. Another checkbox contract used for membership or subscription services. This type of client contract covers terms specific to memberships which include things like upgrading or downgrading a membership or if yours has multiple options, and takes into account that a variety of different types of offers might be combined into one membership.
What could go wrong? Do you have a membership with a time commitment? Do you offer one where access to certain things is given at different points in the membership (like 3 months in, 6 months, etc)? You’re going to want to make sure your purchasers AGREE by checking a box acknowledging these terms. The biggest issue here is them complaining later on that they did not know about these terms and want a refund - and often times, they’re doing this complaining on a public platform which is NOT something you want to have to deal with.
2. Collaboration Contracts
Joint Venture (Strategic Collaboration) Agreement. Use these types of business contracts when you partner with another business or entrepreneur for something like a guest workshop, cross-promoting something or co-creating anything. This will help keep all the terms of the collaboration clear and protect the intellectual property of both parties.
What could go wrong? Here’s an example: you’re hired to speak in someone else’s program - you give the presentation, and then the next day you see them selling your presentation in a bundle with one of their workshops. YIKES. A collab agreement like this will state exactly what they can and cannot do with the presentation - are you actually giving them ownership to your intellectual property to do as they please with it? Or are you licensing it to them to use for their program use only?
Affiliate Agreement. Affiliate programs are a great marketing tool. If you’re launching an affiliate program, this contract lays out everything from the terms of the agreement, prohibited uses, and responsibilities of each party, to when payment is made and under what conditions.
What could go wrong? Disputes over payments is definitely something that can come up, how it’s being tracked, was your affiliate actually paid, did their link work, etc. But also, the court of public opinion comes into play here - for both sides. You want a clear agreement of what is tolerated and not tolerated in this relationship. Remember, you’re aligning yourself with your affiliate (and vice versa), so you may want certain behavior agreed to in the contract AND the ability to end the affiliate relationship if needed.
Guest Release. This type of collab contract is best for non-paid speaking arrangements so that there is no question as to who owns the rights to the content, and how the recorded content can be used, shared, marketed, and edited. Basically, it’s peace of mind for worst-case scenarios.
What could go wrong? Well, let’s say you have a guest on your podcast. It’s a great episode and you have it in a ton of your marketing, and people still listen to it. 1 year later, they demand that you take it down. Did you have a guest release where they gave you permission to keep it up? Your relationship breaks down and they end up suing you for using their name, voice, likeness, etc. Sure, this is an unlikely scenario, but it IS possible, and it HAS happened.
Rental Agreement. If you’re renting out a space - such as a booth in your salon or a chair in your studio - you’re actually creating a lease agreement, so you want to make sure you have written terms to avoid any miscommunication. As a licensed professional, you need to protect yourself and don’t want to have liability for people you are letting into your spaces.
What could go wrong? Missed rent. Someone stuck in your space that is destroying it. Someone who has an expired license and something happens to a client of theirs and you don’t want to be associated… need I say more?
3. Hiring Contracts
Employment Agreement. When you hire employees (congrats on reaching this milestone!), you want to protect your confidential information, intellectual property, and business procedures. These types of business contracts lay out the employees’ responsibilities and protect your business from harm. You can also choose what other limitations you set, such as a non-compete clause, confidentiality (non-disclosure) clause.
What could go wrong? Well… they could learn everything you do, take your intellectual property and start their own business with YOUR proprietary information. Maybe you also don’t want them working for a competitor at the same time as you - don’t just hope they don’t and figure out how to clean up the mess later, include it in a written contract before they start.
Independent Contractor Agreement. If you’re hiring someone for your business, but not as an employee, this is an especially important contract. This hiring contract makes it clear that the person you’re hiring is not an employee (otherwise you could be on the hook for a lot of money) and protects your intellectual property.
What could go wrong? When you hire someone to create any type of work for you (written content, graphics, web design, videos, etc.), the creator automatically owns the copyright even if you’re paying them, not you or your business. An Independent Contractor Agreement ensures the intellectual property is transferred to you.
Non-Disclosure (Confidentiality) Agreement. Want to make sure your business plans, systems, strategies, and any other confidential information are protected? This non-disclosure agreement is a unilateral contract (meaning it is one-sided) that can be sent to the party or person who you want to keep your information confidential. This could be anyone from your new brand designer, launch strategist, contractor, employee, potential collaborator, or yes… even your next significant other.
What could go wrong? Here’s an example: your employee or contractor leaves to go work with a competitor… they know how your business works and share it with their new employer and now they are running their business with your strategy and confidential information.
4. Web Compliance Contracts
Privacy Policy. Having any website that collects data requires you by law to have a Privacy Policy. This is a policy that you usually link to the footer of your website. It tell your visitors what data you intend to collect (email addresses, payment information, even cookies - which basically every website collects), how you’ll store it, secure it, and what you plan to do with it.
What could go wrong? Penalties for not complying with privacy laws can be pretty high… why risk the fines?
Website Terms of Use. Unlike a Privacy Policy, this is not required, but it’s highly recommended! Terms of Use is a kind of contract between you and visitors of your website. It provides information on your refund policy, intellectual property, disclaimers and more. Like many legal things for your business, having this from the start eliminates any problems later. Depending on what state or country you are selling, you might be required to list certain policies here (like your refund policy).
What could go wrong? Let’s say your website has something on it and someone thinks that you were promising something, providing a guarantee, or maybe they trusted a recommendation that you made and were unhappy with it. What if they are so upset with you (because of the money they are now out), and they sue YOU claiming it was your fault? Hopefully you had your disclaimers in your Website Terms of Use linked to the footer of your website.
Tips for making your client contracts as detailed as possible
Give enough information about the services and deliverables you’re providing. This is where so many disputes come from because of the miscommunication and lack of information in the contract. Be sure to lay out all the details clearly so your client knows exactly what they’re getting. Instead of just adding terms like “1:1 coaching” or “group coaching”, include specifics such as:
One (1) 60-minute call per week for 3 months, held through Zoom at a mutually agreed upon day & time.
Zoom link will be provided via email at the start of the term.
Calls may be rescheduled by the client provided notice is given 24 hours before the scheduled call time.
Rescheduled calls are to be held at a mutually agreed upon date and time, but must be made within 1 month of the end of the 3 month coaching period.
Calls cancelled with less than 24 hours notice may be rescheduled at the Coach’s discretion.
Do you see the difference? The goal is to answer all of the possible “what-if” scenarios WITH your contract.
Like, what if the client questions how often calls are? —> The contract says weekly for 3 months.
What if the client claims the calls were supposed to be 75 minutes? —> Contract says 60 mins.
What if the client claims she cannot find the zoom link? —> Contract says it was sent via email at the beginning of the contract term.
What if the client continues to cancel calls with less than 24 hour notice? —> Contract says it’s up to the coach if those can be rescheduled or not.
Include other communication policies. Outline information in your client contracts that covers where communication takes place, how often, when they can expect a response, and who they’ll be getting a response from (you directly or a team member).
The importance of using lawyer-drafted contracts vs. DIY-ing contracts yourself
The majority of the problems I see entrepreneurs make with their business is failing to understand the importance of having lawyer-drafted contracts for everything. This includes:
1:1 clients
Group programs
Affiliates
Partners
Contractors
Collaborations
Memberships
Employees
Every website they have
Podcast Guests
... just to name a few.
Using lawyer-drafted contracts is the difference between being a CEO and thinking about what is best for your business (making sure it is legally protected) and pretending to be a CEO (crossing your fingers and hoping nothing will go wrong despite having no legal protection). Contracts might not be what you want to spend money on, but it’s in the best interest of your business. Spending money on anything else over your contracts is honestly just usually not a great CEO move.
Lawyers help think of all the what-if scenarios and additional terms or language that have to be added into contracts, so if you are DIY-ing your own contract, downloading a free one from Google, copying your coach’s contract, or not using a client contract at all, you could be seriously risking your entire business.
“What are the most important terms to put in my contract?”
This is one of my least favorite questions! The answer is: ALL OF THEM. That’s why they’re all in there. You need all of the terms to protect both parties in different ways. DIY-ing your contract with only “the most important terms” is like trying to get your car to run with only “the most important parts.” Every part is necessary. If they weren’t, they wouldn’t be there.
And listen, I get it. You might not see the ROI in using lawyer-drafted contracts, but when you’re in trouble and paying double (or triple or more) to fix the problem, you’ll see it and wish you had them in place. No one wants to spend money on legal stuff - not even I do! - but your role as a CEO isn’t just to do what you want to do. It’s to do what is best to push your business forward.
The truth is: you’re not special when it comes to business and the legal stuff. Don’t run your business assuming you’ll be lucky and nothing will ever go wrong. Legal problems can happen to anyone. And you’re gonna be a lot better off if you’re prepared aka if you were PROACTIVE in handling your legal (this includes trademarks too).
And to be honest, I’ve never heard someone say, “Damn, I sure am upset I protected my business with that lawyer-drafted contract template.” Contracts are necessary, preventative, and are an investment in your future because they not only protect the business you have now, but the business you are trying to grow.
Now that you see the importance of having a lawyer-drafted contract, you might be asking:
”Where can I find lawyer-drafted contracts, Kelli?”
Right here on my website! I have contract templates and template bundles for all the above mentioned types of business contracts and client contracts you’d need, and more!
All my templates have 2 main similarities:
They’re easy for non-lawyers to use.
They’re designed to protect you from the endless list of potential things that could go wrong.
The best thing to remember is that sure, a lot of the situations I mentioned are unlikely to happen. But they ARE possible, and they DO happen. The best thing to do is put yourself and your business in the best position to handle something should anything happen - and that is by being PROACTIVE with having your contracts in place as early as possible.