I’m super excited to have Pete Konieczko-Hansom, Director at James Legal with me today.
Pete and I have known each other from primary school, and I think it’s fair to say we bonded over our hatred of choir practice back in the 80s.
As time went on, Pete qualified as a solicitor in 2008 and his company helped me when I was going through a redundancy, and then also when I started my own business and needed guidance on contracts, company structures, and all that legal stuff.
And as he’s a solicitor who specialises in corporate and commercial law, I really wanted to pick his clever brain on contracts – are they absolutely necessary for peace of mind with clients? Or are they just yet another expense when starting out? And for those of us who don’t have a legal background, what wording should we be looking out for if we don’t understand what we’re reading?
There’s even reference to Battle of the Forms which I thought sounded like a Game of Thrones reference, but Pete managed to explain it all in plain English.
All of Pete’s links are in the show notes, so please do connect with him if you’d like to learn more.
More Pete-tastic info:
Originally from Melton Mowbray I moved to East Yorkshire in 2006 and qualified as a solicitor in 2008, specialising in corporate/commercial law. I have worked in a number of firms across Yorkshire and have advised clients ranging from international PLCs to brand new start-ups.
I am married with two children and my hobbies include running, surfing and reading a good sci do/fantasy book.
I’m here today with my old friend Pete. Pete and I have been friends since we were four years old. We were just having a giggle before we came on the show about, how times have changed over the years.
Pete, thank you so much for joining me today. So obviously, you are a legal beagle. Can you tell me a little bit about your background?
I qualified in 2008, so, 11 years ago now. I trained in Hull for a large firm. I then worked for another firm, which is where I currently am at – James Legal. I went to Leeds for two or three years, where I worked for quite a large firm, dealing with a large number of PLCs and large companies, but also dealing with small businesses. I then came back to James Legal in January of this year, I came back as a director and the head of the corporate commercial team.
I’m currently sat in our Beverley office, which we’ve only just opened. We now have two offices, we’re now in Hull and in Beverley. We’re slowly expanding our little empire.
If you weren’t doing this, what would you be doing, do you think?
I don’t know. Probably would have joined the army. Something I always wanted to do, or possibly I would have become a project manager. I’d like to think I’m quite well organised and I’ve got good attention to detail, which obviously helps with when it comes to drafting contracts. I think something like project management probably would’ve been what I ended up in. To be fair, I kind of fell into law, as well. So, it would’ve been something like that.
We’re going to be talking about contracts today. For me personally, I feel that, having a contract in place with a client, helps you both manage expectations. So what’s expected of you, both in terms of scope, but also, how much you’re going to be paid and when you’re getting paid.
When I was doing some other research for this interview, I found so many articles out there about how you don’t need a contract, if it’s just a straightforward job, then it’s absolutely fine. What are your thoughts on having a contract in place? Are they really a justifiable investment, when money is tight, when you’re first starting a business?
I think having a written contract is all about certainty. What we generally find, part of the biggest cause of disagreements, obviously after non-payment, is miscommunication and contracts are really good, are really worth setting up the baseline. It sets out various things like scope of work, payment terms, what you’re actually going to charge. It just avoids issues, or it certainly reduces a number of issues, because you can say, “Well look, the contract clearly says your payment in 30 days. It’s been 60 days, you’re clearly in breach of contract.” Or, “Okay, we’ve agreed we’re going to do five hours of work. We’ve done 10 hours of work. Clearly,” and it’ll say something along the lines of, “Any additional time will be charged at an hourly rate.” You can clearly point to the contract. It’s very hard to wiggle out of it.
Obviously, people will always try and wiggle out of these things and it becomes a personal view on what, commercial view of what you do with it. But, if you have to take any kind of legal action, then you’ve got it in writing. Judges love stuff that’s in writing, quite frankly. It makes life a lot easier, not that you’ll ever get to that stage. But, in a worst case scenario. So in terms of do you need a contract? People always think, “I don’t want a contract. It’s 50 pages long.” And there are contracts that can be 50, 100, 200 pages long. But, for what you’re doing, for this kind of thing, you don’t need a contract really that’s more than maybe about 10 pages long at a maximum. It can be, when you’re starting off as a business, obviously, people don’t want to go to the expense and cost of the contract and I get that, completely understand. We often say to clients, “Look, you’re starting off. Get your feet under the table. There’s no point in spending lots of money getting contracts, if you’re not going to get any work.” So, as a solution, what you can do, you can go the email route. But it’s not just a case of saying, “Yes, I’ll do the work for you”. What I often get with contracts, is a contract summary or front sheet. So things like when you’ll start working for them, when you’ll stop working for them. What you’re actually doing. How much you’re getting paid, whether that’s hourly rate, or a fixed fee for a block of work and then saying what the payment terms are. If you can get those things into the email, and they agree to it, then it’s a legally binding contract. It can be an email. So when people say it can be an email, yes it can be. But for it to be worth the paper it’s written on it, if you like, it’s got to have those key points, really.
So that’s really to start off with, what I would probably say is, have almost like a contract summary sheet, which you can copy and paste into the email. Start dates, end dates, scope of work, payment per hour, or for fixed fee and payment terms and if you’ve got those things in there, you’re probably all right for the first 6 to 12 months, to be honest, until you start building up real traction. At that point, that’s when you have to start thinking, “Okay, I’m taking on some big contracts now, “I’m taking on some bigger clients.” At that point, you might think actually, “Yes, now I’ll go see speak to a solicitor and I’ll get something more formal put in place.”
What kind of additions would they add to that initial email agreement then, that would help benefit that business?
The kind of things you would then be looking at trying not to get too technical, but you’ll want things like limitations of liability. So what happens if you get it wrong. Let’s say you’re tasked to sort out a meeting at a hotel and it’s with a big client and for whatever reason, you get the date wrong and because of that, the meeting doesn’t go ahead and they lose the contract. It might be a contract that’s worth, I don’t know, thousands of pounds. If that’s your fault and you’ve done something wrong, you are liable for it and you could, in theory, be sued by your client. So what you’d generally have in the terms, is you’d have something called limitation liability clause. That would say, “My liability is capped to x amount of money”. It’ll be capped to the price that you paid for our services. So let’s say they’ve paid you £500 for this block of services and you fail, you mess up, then you’ll be trying to limit your liability to that £500, rather then the thousands and thousands of pounds that you’ve lost them the contract. You’d always try to offset that with insurance anyway. So you try and get insurance in place for that, that’s something else to think about.
That’s another episode. (See Stuart Pigram – Episode 009)
That’s kind of outside of the scope of what we’re talking about here. But you’d have termination provisions. So, in plain English, ways that you can end the contract. What often comes along is, you’re starting out the business and you get your first big client and it turns out, actually, 6 months, 12 months, they’re a real time sink. You don’t really want to do anymore work with them and because you were just so happy to get that client, you may be only charging him half of what you’d charge clients nowadays. And I know this is something we’ve talked about in the past, how you re-evaluate actually, “My time, I thought my time was only worth £10 now, but it’s actually worth £50 pounds now”. You do all this work for this client, £10 an hour. You go back to them and you say, “Look, I want to up my fees.” And they say, “No, I’ve signed you up to this two year contract.” You’re probably dealing with someone who’s quite savvy. Knows exactly what they’re doing, taking on a freelancer who’s new to the game, if you like. Knowing full well their value thinking, “If we get them at £10 per hour for two years, this is great.” And you think to yourself, “Well how can I get out of the contract?”
So if you have termination provisions, you can have various things in there. It might be that you’ve got the right to terminate the agreement if they fail to pay you on time three times in a row, for example. Or, if they don’t provide you with instructions. Often, we send out contracts to clients and we expect clients to come back to us with instructions. Sometimes it can be hard, you can’t do your job unless they communicate with you. What we often have is, something in there like, “If we ask you for your instructions and you don’t come back to us within a reasonable period of time to allow us to carry out your instructions, we can terminate a retainer.”
Even though you’re not doing legal work, there’s actually a lot of similarities between what we do. It can get really complex with the termination provisions. But that’s the kind of thing you’re looking at. So, if they fail to pay on time three times in a row, for example, or they fail to give you instructions. Or a common one, if they go bust. Payments are usually one of them. I’ve been doing quite a lot of stuff with suppliers. One of the terms in their contract was that you have to make sure that the goods are ready to be picked up, so our client was supplying these plastic packaging for the food products. And we said, “That’s fine. But you have to make sure the food is basically ready for us to collect, so that we can package it.” And they failed to do that several times in a row and we were like, “That’s material breach of the contract. We can’t fulfil our part of the contract. So we’re terminating the contract.” So it’s applying it to what you do.
So it’s protecting both parties.
It sounds like it’s coming back to that managing expectations. So that each side knows exactly what’s expected of them. And then can fall in line accordingly.
Exactly. And if you build up a good relationship with a client, you might go, “Actually, I know you’ve not paid me on time, but you’re normally quite good at pay, I’ll let you off.” And that’s fine and you can do that. You don’t have to enforce and that’s the beauty of the contract. You don’t have to enforce a contract, unless you want to. But it’s there as a baseline and it applies to all sorts of contracts. I would say that’s a good baseline. You can always deviate. But if it all goes wrong, you can go, “Well, this is what we’ve agreed. You can’t really argue about it.”
I completely understand. I’m so risk averse anyway, that I invested in contracts right from the start. I think I started in the August and by the Christmas, I had a client who had authorised a whole load of extra hours. I had all the email correspondence about it, but they refused to pay the extra hours. Even though it had been authorised. And, yes, I had the security of the contract being in place, but I also felt a little bit timid as a new business owner. And about how strong I should enforce that like, “Hey, we’ve signed a contract. You need to pay.” And also, because they were an ongoing client, or they were supposed to be, I didn’t want to annoy them by going, “I’m not going to do any more work until you pay me.” But in actual fact, if I had stood my ground with that contract, they probably would’ve taken me a lot more seriously.
I know certainly having the contract in place gave me that additional peace of mind. At least it had been agreed in advance, it was just they were being a bit weird about it all.
One thing some people say is, “Is it true that having sight of a contract alone is enough to validate it?”. Let’s say I use an electronic signing system. I make it super easy for the clients to do their part and they can sign it on their phone or whatever. But sometimes you don’t get the contract back. Is the fact that I know that they’ve read it enough?
Yes and no. It’s for a business to business, you need to be careful with this kind of thing. It’s different with business to consumer.
But what we’re dealing primarily with business to business, and the presumption is, if you’ve seen the terms and conditions and you’ve had the chance to read them, whether or not you read them is almost irrelevant. Because that’s not how the law works. Have you had sight of the terms and conditions? Have you said anything about them? If you disagree with them, you’re kind of under obligation to say, “Actually, I disagree with this. Can we change it?”
The courts generally view businesses and business people, as being sophisticated and by that you assume because you’re in business, you’ve got a general understanding.
Even if that understanding is just, “Actually, I’ve got a contract in front of me. I don’t understand it. I’ll go speak to a solicitor about it.” And if you fail to do that, that’s on your head.
So, is it enough? The problem you’ve got is, they’re going, “Well, I never saw the contract.” But what I often say to clients, because there’s a thing called battle of the forms, which is perhaps getting a little bit deeper.
It sounds like a Game of Thrones episode.
It’s not as exciting as that, unfortunately. A lot of lawyers get very excited about it, but it’s not that exciting. What it means is, let’s say, you send out your terms to your client. Your client goes, “That’s great, thanks Vic. I accept, but subject to my terms”. So then the presumption is, you go, and you don’t say anything. The presumption is then you’ve accepted their terms. So you would have to then go back, “Well that’s great, I’m grateful you’ve accepted, I’m really happy to work for you, but it’s subject to my terms”. Then, if they don’t reply to that, it’s subject to your terms. But then they’ll go, “That’s great, but it’s subject to our terms”.
It comes down to who’s communicated their terms, it’s complicated. But some really do get excited about this. It comes down to which terms were in operation. You have that knowledge so you can say to clients, “Are you sending out your T&Cs?”. You might be sending out T&Cs to their clients on their behalf. So you need to be aware of that, as well. It’s just worth being aware of that. Effectively, it’s whoever’s sent their terms and conditions last.
So, going back to the first question, yes, probably sight is enough. However, I would always try and insist on a signed one. What we do here at James Legal is, we always send out an order form. We always say, “Please send this back signed”. And at the moment, we don’t have an e-signature system in place. That is something that we are looking into and will have in future. But you often find a lot of law firms don’t do that. They’ll have, “Here’s our terms and conditions. Here’s our client care letter. Please sign it and return it to us.” But then, and this is common across a lot of law firms, we have something in there like, “Even if you don’t sign and return the T&Cs, you’re still bound by them”. By instructing us and asking us to continue to act, you are agreeing to these terms. As long as you’ve got something in there along those lines, then that’s the added protection. But in an ideal world, which doesn’t exist, you will always try and get something signed.
That makes a lot of sense.
So with this whole battle of the terms. Sometimes the clients will come back, and this is across any industry, they’ll ask us to sign an NDA, a non-disclosure agreement. What are your thoughts with how to respond in that situation and is there anything that we should be looking for in particular, in terms of the NDA, before we sign it?
What I’ve seen happen quite a lot is, clients will try and put other terms into the NDA. So that’s the first thing to look out for. Stuff that is contradictory to your terms.
So if you sent out your terms and they go, “That’s great, that’s brilliant. Thanks, happy with your terms, but here’s our NDA. Please sign it”. And the way you can potentially get around that is, you can put confidentiality provisions into your basic terms. So you’ll have something in there saying that it’s called a mutual confidentiality clause. You basically say, “Anything you disclose, we agree to keep confidential. Anything you disclose, we agree” and vice versa. It’s all covered there.
NDAs aren’t the most complicated documents, if you know what you’re looking at. And the problem you’ve got there is, do you know what you’re looking at? It’s just being aware of what’s in there. If it’s the first few times, or if you’re unsure about it, it’s always worth speaking to a solicitor.
Personally, I don’t know what other firms charge. We don’t charge a huge amount to look at, if you said to me, “Pete, have a look at this NDA.” And obviously, given our long-standing friendship, I’d probably look at it quickly for free for you. But not necessarily for everyone else.
For everyone else it would be £1,000,000.
But you’re probably looking at maybe an hour of time maximum to look at it and advise on it. So in the grand scheme of things, you’re not looking at a huge amount of money, to have that certainty. With that, once you’ve done a few, you get a feel for what’s in there and it’s looking to see whether it’s a mutual confidentiality provision.
What you want to look at is whether it’s a one way one, or whether it’s mutual and it’s usually obvious in the language. So you’d be looking at the terms and the legal jargon. They can change it, it can be more bespoke than that. But you just look to see who the discloser is and you look to see who the recipient is. If they are the discloser, what you’ll see at the head of the contract. It might be, Bob and Bob Limited and in brackets “discloser”. Then they might have the freelancer in brackets, “recipient”. That way, you think that’s a good clue in one way and they’re only protecting themselves. Whereas, what you want to look at in the terms, if it says “recipient”, it’ll be the person who receives the confidential information. If it says “discloser”, then you probably know that it’s a mutual one. Because at the end of the day, you’re potentially disclosing confidential information to them about your business and vice versa. So you want to make sure that you’re protected as well.
Other things to look at would be, to see if there’s any kind of damages clause in there. You don’t see them an awful lot, but some of the bigger companies will try and sneak something in saying about if you breach for terms of the NDA confidentiality agreement, that you’ll have to pay them x amount of damages. That’s the kind of thing that you maybe want to be looking out for. But, if in doubt, get legal advice. It shouldn’t cost a huge amount. It certainly won’t cost as much as it would to draft a contract. And is it worth it? Yes, for your first couple of NDAs you’re signing, yes, it’s probably worth getting someone to look at it. If you can build up a relationship with a law firm, most law firms will look at stuff like that for very little money. Because they want, same as you’re trying to maintain the relationship with your clients, we’re trying to do the same thing.
Like I said, I am particularly risk averse. So I gain huge peace of mind from knowing that I have somebody like you, who I can turn to, should I need some kind of expert advice. Because I’d rather turn to somebody like you and pay you an hour’s worth of time, rather than bumble my way through Google and not really understand what it is I’m searching for, let alone reading and then hoping that I’ve got it right.
For me, I believe that having a contract and having good legal advice, is a sound investment and that it shouldn’t be considered as just an expense. It is a genuine business investment, because I feel like a business benefits from it.
The best clients are the ones that understand the value of legal advice and they don’t see it as, “I’ve got to pay my lawyer”. It means I can get on with my business and you can get on with doing your job, whatever that is.
What I often say to people when they talk to us. The contract is £1,000, for example. And they say, “That’s a lot of money”. I’m like, “Well, yeah, but think about how often you’re going to use that contract”. If that’s your contract and you’re going to use that for the next 5 or 10 years. It’s like paying for over 10 years, that’s £100 a year.
How much do you pay for your insurance? How much do you pay for your car insurance? It’s having that peace of mind. It’s the same kind of thing, really. It’s understanding the value of it, because if you don’t have it, quite frankly. I know how expensive it can be, when you get into a dispute it can spiral out of control and you can save a lot of time and effort, not just money, but time management.
If you’re running a business, you don’t want to be dealing with a dispute. Because it is really time intensive and a well drafted contract can help stop that from happening. No guarantees, obviously.
Slip that disclaimer in there.
Flash a disclaimer across the screen.
Thank you so much for your time, Pete. I will add your contact details into today’s show notes, so people can find you and contact you directly, should they wish to work with you. So thank you so much for the time.
My pleasure. Thanks very much and thanks for the opportunity.
Series One of the Remote Working Podcast
So over the next few episodes, I’m going to be having some fantastic guests coming in to speak with me about all of the issues relating to building a remote working business and all of the tech issues and the tech challenges that building a team and building a trust along the way as well. So I hope you enjoy it. If you have any questions, drop me an email. It’s firstname.lastname@example.org.
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