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Chapter
3

Define the building blocks of a valid contract

Starting in this step we will learn and define legal terms and concepts and then apply those learnings toward developing your own freelance contract.‍

What does my contract include?

The freelance contract you create defines the terms and conditions of your working relationship, and it is essential that both parties agree to everything described therein. In this step, we'll discuss what contracts are, what they include, and why they're so important when you're freelance.

A contract is an agreement between two or more parties that creates legally binding obligations that each party agrees to abide by. In order for a contract to be valid, it must include: ‍

  1. Offer 

  2. Acceptance

  3. Consideration 

  4. Intention to create legal relationships

What does this mean in layman's terms? Each party involved needs to be able to both offer and accept the terms of the contract, and each party should receive something in return (consideration). Most importantly, everyone involved needs to be aware that they have legal obligations under the contract!‍

What any freelancer contract should do:

  • Name the parties

  • Describe services the freelancer will perform

  • Define the project period of performance

  • Define the project scope

  • Describe the processes for revision and specify what revisions will be in scope

  • Drafts and ownership

  • Describe the timeline for the performance of the services, deliverables, and milestones for projects, and any other relevant factors (ex. warranty periods)

  • Provide information for both parties: name, address, email

  • Include a signature block for both parties to sign

As a reminder, a contract is an agreement between two or more people that creates mutual obligations that are enforceable by law. A contract can be written, spoken, or implied by the actions of the parties involved. ‍

It's important to note that not all agreements are considered contracts. For an agreement to be a contract, it must meet certain requirements, as we addressed in the last step. Only a valid contract can be enforced by a court. 

Contract validity 

The offer must be for something that's legal and has value, such as goods, services, or money. There must also be a consideration, which is something of value given by each party to the other in exchange for the promises made. Each party to the contract must have the ability and intention to fulfill their obligations under the contract.‍

A contract is not valid if it is obtained by fraud, coercion, or undue influence. It can also be voided if one of the parties was underage or mentally incapacitated at the time the contract was made. If either party breaks the contract, the other party may sue for damages.

Offer and acceptance

For a contract to be valid, there must be an Offer made by one party and accepted by the other.‍

An Offer is a proposal or suggestion made to someone with the expectation that it'll be accepted. Say you're shopping for a new car and you find one that's perfect. The dealer may make you an offer to buy the car at a certain price. This is an example of an offer in the real world - the dealer is proposing a deal to you and is expecting that you'll accept.

‍Acceptance for freelancers means agreeing to the terms and conditions of the contract presented by the client. This could be anything from the work that'll be completed to the payment that'll be received.

When you ask your future clients to sign your contract, you'll be the Offeror: you are offering your services in response to a solicitation by the client, and the client accepts your terms, or the parties negotiate and eventually you make an offer they accept. An example of acceptance in the real world would be someone ordering a new tv online. The moment they place their order for the tv, they are accepting the tv seller's offer to sell them that product.

Go to the workbook and write out what an offer is in your own words.‍

In order for a contract to be valid, it must be supported by consideration. Consideration is defined as something of value that's given to the other party in exchange for something of value from them. This can be money, goods, services, or anything else of value.

Mutuality / intent

Mutuality of Obligation is a fancy term for saying that both parties in a contract have to do what they said they would.‍

Let's say Mindy’s Cupcakes hires Dom, a designer, to design their new website. In order for the contract to be valid, Dom needs to create the website and Mindy’s Cupcakes needs to pay him for his work. If either party fails to do what they agreed to, then it's considered a breach of contract and could lead to a legal battle.

Did you go through and define Offer, Acceptance, Consideration, and Mutuality in your own words? Defining new terms in your own words and writing them down has been proven to help with communication, your ability to retain information, and understand new ideas. This will also help if you ever want to explain these terms to someone else.

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