Basic contract law for freelancers and digital nomads
Many people panic when they hear the word ‘contract’. This is probably because people like me, those darn lawyers, have made it all seem more complicated than it is! In this blog post I’ll try to make contracts as clear as possible for freelancers and digital nomads.
The main thing you need to know is that a contract records the outcome of commercial negotiations between two people. As long as nothing you’re doing is illegal, you can agree whatever you want in your contract.
DIFFERENT TYPES OF CONTRACTS:
1. ORAL CONTRACTS: DO THEY PROTECT YOU?
Most countries legally recognise oral contracts –so if you tell me that you’ll sell me a dress and I agree to pay £10 for it, and we’re both clear that this is an agreement that we can rely on, then, voila, that’s a contract. Whilst it is legally valid in a lot of countries, it’s always a good idea to write down what you’ve agreed with the other party. After all, if there is a conflict or misunderstanding, it’s hard to prove what the other party said they would do. In theory, if you have concluded an oral contract, you could sue your business partner for breach of that contract. However, in court you would need to prove the terms of the contract, in order to prove that your partner breached the contract. Therefore, if you start commercial negotiations by talking to someone, I would always follow up that conversation by confirming the terms in an email. This would constitute a written contract, as I will outline in my next point:
2. WRITTEN CONTRACTS: IS AGREEING TERMS BY EMAIL ENOUGH?
Just as you can have an oral contract, you can also conclude a contract in writing. As long as you agree over emails, or even WhatsApp messages, that you will sell me your dress for £10, and we’re both clear that this is an agreement we can rely on, then that counts as a valid contract in many countries.
A disadvantage of this way of contracting is that email chains or multiple messages are often unclear. If there is a conflict later on, you will spend a lot of your time trying to prove your point of view, which may be hidden in multiple messages or emails chains. For example, you might have said something general, or by way of example, in an initial email. You never meant for this to be a binding term of a contract. Your business partner might disagree and claim that this is part of the contract. You will then spend your time, as well as money on a lawyer, trying to prove or disprove which parts of the email chain where meant to be binding, and therefore part of the contract, and which ones were only said in passing or to illustrate certain points.
3. FORMAL CONTRACTS: WHEN DO I NEED A FORMAL CONTRACT?
In certain situations, some countries require you to enter into a formal written contract. For example, if you handle the personal information of EU citizens, you’ll need to have a written contract in which you state how you treat and protect that information. Similarly, in many countries the law states that if you transfer, i.e. assign or licence, copyright then you’ll need a written contract.
Formal considerations aside, in many situations you probably want a written contract even if you don’t legally need one. This is because a contract provides you with a roadmap for how you and any other parties involved will behave, and for what will happen in case something goes wrong. I would include that as this is an important thing for many people who go into contracts.
USING A CONTRACT AS A ROADMAP THROUGH A CONFLICT:
1. WHAT IF THINGS GO WRONG?
In most contracts, you’ll agree to a path through any conflict. There’ll be a notice provision, telling you how and when you need to tell your contractual partner(s) that something is wrong. The clause will also define how much time you have to amicably resolve the conflict.
If you do manage to come to an agreement, you might both agree to amend your contract. When amending contracts, the same contractual principles apply to the amendment as to the original contract. An amendment can be made in a conversation, by email or in a formal, written contract. The same considerations apply to an amendment as to the original contract: if you want to be sure that you can prove the terms of the amendment, it’s best to have it set out as a formal contract. However, in most countries, oral and written contracts concluded by email would also be valid.
Your contract will also say what will happen if you’re not able to resolve the conflict. In some rare cases, you can rely on principles such as force majeure where an act that is outside of your control (such as COVID- 19) prevents you from fulfilling contractual obligations.
2. WHAT IF THERE IS AN UNRESOLVABLE CONFLICT?
If the conflict persists and you can’t resolve it, the last resort is to sue. In most cases you have a choice between going to the courts of the country you or your contractual partner live in, and using private international arbitration, a privatised way of resolving conflicts. In either case, it will be very expensive, as you’ll have to pay court or arbitration fees as well as a lawyer to represent you. Before you sue, you will send a demand for payment letter or a ‘letter before action’. Many claims are settled at this stage.
It’s important to note that no matter how good your case is, suing the other party is often not financially worth it. A good contract does a lot more than enable you to sue the other party, though. At best, it’ll give clarity to your commercial positions, provide a clear path through your business relationship and reduce the risk of things going wrong.
If you have any further questions or want to talk further, please comment below or write to me here. You can also read about the services I offer here. If there’s something else you need help with, just let me know and I’ll see what I can do to help!