Contracts support all successful collaborations, but red flags can indicate trouble ahead.
We want creatives to focus on creating without dealing with lousy contract situations. So we offer 6 red flags that we see in contracts, along with 5 shady behaviors that should alert you to potential issues. This article won’t replace the eyes of experienced lawyers, but it helps to know how we look at things.
Even if you never choose to work with us to review and enhance your creative contracts, you can use this guide to empower yourself and know what to look out for.
6 Contract Red Flags We Look For When Reviewing Agreements for Our Clients
As lawyers, we’ve reviewed thousands of contracts for our creative clients.
No matter what people are doing, we look for red flags to protect our clients. We seek these out during every review. This article is not a complete list of every possible red flag, but it will give you a sense of what raises alarm for us as lawyers.
Here are 6 red flags we look for when reviewing contracts for our clients:
Accidentally giving up copyright or trademarks.
When our creative clients collaborate with others, precious intellectual property is involved.
Intellectual property, such as copyrights and trademarks, is critical for creatives and brand owners. We always want to ensure that our clients aren’t giving up more of them than they need to, and we want to see the contract address intellectual property ownership. When contracts don’t address intellectual property, creatives risk losing their most valuable assets.
We position our clients for long-term success and growth by paying attention to intellectual property.
No safeguards for getting paid on time.
For service businesses, getting paid on time is vital.
Contracts should ensure that everyone gets paid on time. We want to see safeguards like a license to IP transferring on payment or attorney fee provisions that give our clients leverage if someone tries to skip out on a bill. Doing this means our clients get paid on time and spend much less chasing money or arguing with clients.
Thinking about this early and getting it into contracts directly impacts any creative business’ bottom line.
There is no way to get out if things go wrong.
What seems like a good idea at the start might not seem so good a few weeks or months later.
Things change – and that might not even be anyone’s fault. Every contract should address how people can exit it if things aren’t working well or conditions change. Not having a way out can leave everyone stuck in a bad situation that gets worse and more expensive.
Flexibility allows everyone to exit a situation that is no longer working without fighting about it.
Vague language that leads to conflict.
With vague language, legal mayhem ensues.
When words are open to interpretation, it becomes difficult for people to know the exact terms of the deal. We want to get specific—”ASAP” is unclear; “11 am Pacific” is not. If you see vague language, you must proceed with caution.
After looking at thousands of contracts, we can spot ambiguous language from far away and replace it with more concrete words.
Our clients are taking on too much risk.
Risk is part of business; learning to manage it is the art.
If things go wrong, we don’t want our clients to take on oversized risk and get sued for more than they bargained for. Limitation of liability and indemnification clauses are our friends here. We can use clauses like that in our contracts to determine who bears risk ahead of time instead of arguing later.
That way, we don’t suffer damage we didn’t bargain for.
No clearly defined deliverables
We need contracts that set the finish line.
Too many contracts are vague about the finish line. Deliverables, deadlines, and payment should all be clearly defined. If they are not, disputes can arise over whether a service provider completed the work satisfactorily.
Using concrete language and objective measures, we can accurately define when a project has come to completion.
Shady Contract Behaviors For Creatives To Look Out For
If we know what to look for, we can see the tricky people coming from a mile away.
When people get weird about contracts, we are on red alert. When we see sketchy behaviors from people we are considering working with, we can take that as feedback that a collaboration might be a bad idea—not always, but enough for us to start asking tough questions.
Here are 5 behaviors that should put any creative on high alert when dealing with contracts.
Freaking out when you want an attorney.
Having an attorney review your contracts is a normal part of doing business.
Not wanting an attorney to look over the contract typically means one or two things: either the person needs to be more experienced or is up to something. Either way, that’s a good signal; proceed carefully. Additionally, you might ask them questions about their specific concerns.
The next step is to speak with your attorney and get their take.
Wanting to do deals on a handshake.
We use contracts to make sure that deals go well.
Not working with a written contract means relying on everyone’s perfect memory or honesty. Despite our best efforts, memory and honesty are only sometimes reliable. Contracts help us remember what we agreed to and allow us to hold each other—and ourselves—accountable.
Choosing to work on a handshake creates horrible “he said, she said” situations that take a lot of time and money to fix.
“Boilerplate” contracts.
We have nothing against people who use template contracts, per se.
However, trouble arises when someone pulls a contract from the Internet without understanding its contents. This method means that they will have difficulty adapting or changing things in a way that can serve you. Since a contract reflects your mutual understanding, it won’t function as it should if they don’t understand it.
Instead of generic contracts, get them to engage in a productive discussion about goals, boundaries, and expectations and get clear on that.
Being rushed to sign a contract.
We all want to move quickly, but excessive pressure to sign soon indicates something amiss.
When you’re signing a contract, you’re committing. That means that you need time to consider the ramifications. If you get rushed into a deal and don’t have time to think about it, you are still stuck with it.
So, give yourself the time and space to ensure that what you agree to works for you.
Not having clear communication about the deal.
You want to get crystal clear on the deal before signing anything.
Contracts are only as good as everyone’s understanding of the deal. Consider it a red flag if you or the other person don’t know or can’t explain what you’re signing. Everyone should be able to communicate precisely what everyone agrees to.
If you feel things are unclear or people aren’t communicating well, it might be time to step back and seek clarity.
Work Powerfully with Contracts
We’re huge proponents of contracts as tools to support you in collaborating with others.
We’ve helped thousands of clients use contracts to collaborate well with contractors, customers, and other creatives. So, we know how important it is to stay aware of pitfalls so everyone can work well together. When things go well, everyone gets more, and opportunities multiply.
None of these red flags are deal-killers.
They mean that you should proceed cautiously. Successful creators rely on experienced legal support to get this right. It’s cheaper to spot problems ahead of time than to fix them later.
So don’t be afraid to reach out and get support with all of this; it’s what we do every day.
