Don’t Be Penny Wise and Pound Foolish – By Rachel Hirsch

by Colleen on May 14, 2014

tl;dr – Why investing in contracts early on can mean costs savings in the long run.

The affiliate marketing industry fosters relationships between online marketers that would not otherwise blossom in traditional brick-and-mortar businesses. It allows people from all over the world to connect with the simple click of a mouse, engendering almost instantaneous trust between business partners without the stuffiness and formalities of the corporate world. feedfront-issue-26-cover-small

While doing business over email, Skype, or AIM certainly has its advantages, and can be cost-effective, sometimes the cost of doing business online is that online marketers forgo certain corporate formalities that would actually save them money in the long run.

Often, online marketers pinch pennies when it comes to paying attorneys to draft solid business contracts, thinking that they will save money by either drafting the contracts themselves or by relying on oral agreements with their business partners.

What actually happens, however, is that the lack of a binding written contract leaves the online marketer defenseless when a business dispute inevitably arises.

Although oral agreements are legal and binding in many situations, they are often difficult to enforce in court (and, in some situations, are not enforceable at all). A written agreement is less risky than an oral agreement, because you have a document that clearly spells out each party’s rights and obligations in case of confusion or disagreement.

    When drafting a legally-binding contract, keep in mind the following:

    1. Keep it simple. Written contracts do not need a lot of legalese to make the contract enforceable. Instead, create short, clear sentences with simple, numbered paragraph headings.
    2. Identify each party correctly. While this may seem obvious, often contracts capture incorrect legal names with the wrong spelling. The difference between identifying a company as an LLC or Inc. can be crucial to future enforcement.
    3. Include details. The contract should spell out the rights, duties, and obligations of each party in detail, including each party’s representations and warranties in carrying out the contract. Courts generally interpret contracts based on their “four corners,” so include all of the details to which the parties agreed.
    4. Specify payment obligations. The exchange of money is often the most contentious issue in contract negotiation. Specify who pays home, when the payments must be made, and under what conditions.
    5. Specify a termination date. If applicable, specify the events on the occurrence of which the contract will be terminated, and describe the method of giving notice.
    6. Include indemnification provisions. Make sure each party is responsible for carrying out its individual duties and indemnifies the other party for its failure to do so.
    7. Include relief provisions. Should a dispute arise in the future, specify the relief available to the aggrieved party (e.g., liquidated damages, attorneys’ fees), how that relief is obtained (e.g., through litigation, arbitration, or mediation), and where the relief is obtained (e.g., the governing law and jurisdiction).

Investing in a solid, written contract at the start of a business relationship can actually save a business a lot of money, and heartache, in the future. Don’t be fooled otherwise!

Rachel Hirsch is a Senior Associate at Ifrah PLLC, a law firm in Washington, D.C.

This article appeared in issue 26 of FeedFront Magazine, which was published in April 2014.

Comments on this entry are closed.