blog

post image

The Dangers of the Verbal Contract

<p><em>During your career as a freelancer or a self-employed worker, you might make a few mistakes. It is normal; no one is immune to bad decisions. However, there are many errors or unpleasant situations you can easily avoid. Today, we will talk about the dangers of a verbal contract and why it is always better to have a written document or a contract of services.&nbsp;</em></p> <p></p> <h3><strong>What is exactly a verbal contract?</strong></h3> <p>A verbal contract is simply an agreement between two people; however, there is no written proof of the deal since it was made verbally. If you have any problems, it can be difficult to say who is right and who is wrong. Moreover, if you finish a job and have issues being paid, it will be challenging to collect what you are owed if no documents state what was accepted by both parties.</p> <p>New freelancers, unfortunately, frequently use verbal contracts. We often know the person, and we do not want to bother them with an official agreement. We do not want to rush them or lose the contract. If it is someone you trust, why would it go wrong? How many times did we read stories from freelancers who were living unpleasant situations because they had no written contracts? How many times did we see a self-employed worker regret trusting someone from their entourage?</p> <p>Here is an example based on a true story. You are a graphic designer and work on a specific project for a business you know. Along the way, your contact person calls you and asks to add something. You reply that it will cost an extra since it will need a few additional work hours. They accept. A few weeks later, you send the final invoice with the extra amount. Unfortunately, you learn that your contact person left the business. The business now does not want to pay for the extra because it was not in the original contract, and you have no written proof of the agreement you took. Of course, you can always try to fight, but it will be difficult since you have no official document. Everything would have been easier with an email or a new contract.</p> <h3><strong>What is the value of a verbal contract?</strong></h3> <p>What is exactly the value of a verbal contract? Once again, if there are any problems, it will be your word against theirs, making it difficult to determine who is right. You must then remember everything that was said, when, where, and how. Furthermore, according to the Small Claims Legislation (article 2862 of the Civil Code of Quebec), if the value of the litigation exceeds $1500, testimonials only cannot be accepted. This can be problematic if you need to go to court.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>In sum, does the verbal contract have a legal value? Technically, yes, but a written agreement is always a better option. You will then be more protected if there are any problems.</p> <h3><strong>Reminder: The importance of the contract of services</strong></h3> <p>To avoid most unpleasant situations, it is strongly recommended to take the time to note down everything. A year ago, Aicha Tohry, a lawyer from Montreal, wrote an article on this topic on Momenteo&rsquo;s blog: <a href="https://www.momenteo.com/blog/the-importance-of-having-a-good-contract-of-services" target="_blank">The Importance of Having a Good Contract of Services</a>. Is it mandatory to have a contract of services when you are a freelancer or a self-employed worker? The answer is no, but besides looking more professional, the chances of having a dispute with your client will be lower. A contract of services will also help manage the expectations of both parties.</p> <p>But what should a contract of services include? To be honest, it should consist of all that could be relevant regarding your project but also the professional relationship. Therefore, we should find in a contract of services a complete description of the service (what is included, the fees, what is considered as extra), the conduct of the service delivery (how long it should last, what should be done, and when), your payment terms (which payment methods are accepted, down payments, when the client needs to pay), the intellectual property (who is the owner of the intellectual property, what can be done with the work), and the termination of the contract (how and why terminate the agreement). To this, you can include everything that can be relevant to your field of activities. If needed, you can work with a lawyer to have a contract of services that answers all your needs.</p> <p></p> <p>In conclusion, avoid verbal contracts as much as possible. It will prevent you from having conflicts with your clients and living unpleasant situations. Take the time to write down everything and choose to have a legit contract of services. And since we are talking about mistakes you can avoid, do you know the <a href="https://www.momenteo.com/blog/the-most-common-errors-selfemployed-people-make-when-doing-their-accounting" target="_blank">most common errors self-employed people make when doing their accounting</a>? In this list, we find not keeping receipts and contaminating your accounting with personal expenses.&nbsp;&nbsp;</p> <p></p>

Ariane