When Do I Need a Contract?

How many times in your life have you heard someone say, or said yourself, "I wish I would've had a contract." Probably a lot. The simple fact is that a lot of time, trouble, expense and headaches can be avoided in life if only we had contracts drawn up for situations and endeavors. Let's answer the big question of "when" a contract is needed and the security, or peace of mind, that it can bring to your life.

Contracts: Protecting Yourself in Everyday Life

Some people are under the impression that you only need a contract for business dealings and rental agreements. Not so. This is a common misconception that many people have. It is not until they wish to protect their rights that they find out one thing only could have saved them so much trouble, a contract. Here are some circumstances that you might not realize how beneficial a contract would be:

Babysitter/Nanny: As parents we want to know that our children are being taken care of when we are not there to do it. Whether it is once a week or on a daily basis, a simple contract is ideal. It states clearly what is or is not supposed to take place in your absence. That way, if the caregiver breaks the contract and an accident occurs, or other problem, you can get the court to recognize the problem and seek restitution for damages. Whereas, if you don't have this legal provision in place you will likely get nowhere with the courts unless you can prove your rights were violated or a law was broken.

Personal Loans (Money): Most of us have done this. A friend or relative comes to you with a financial need and you want to help them. But, sometimes they don't pay you back. Let's say you loan a friend $200 to pay an electric bill or to make a car payment, with the understanding that they pay you back as soon as they get their check. If you only have their "word" and they choose not to pay you back then you may have some trouble getting the court to rule in your favor as it is one person's word against another. With a contract the person would be held responsible for the debt and you could easily win your case.

Personal Loans (Property/Items): Loaning a car, a piece of machinery, equipment, jewelry or other expensive items can carry with it certain risks. A simple contract stating that a person is liable for the items while it is in their care can save you a lot of time and money should anything happen to it. Imagine loaning a friend a mechanical wood splitter. Let's say the friend forgets to cover the machine and a heavy storm comes in and ruins it. If the friend refuses to pay the full value or replace the item and you take him to court his case might be that you took the risk of loaning it without telling him how expensive it was or how important it was to keep it covered up during severe weather. Even if you did verbally state it to him, again his word against yours. He could convince the court that it was just as much your fault as his.

(Out of Court) Child Visitation Plans: These days, with all of the horror stories coming from the family court system, some parents are deciding to keep custody arrangements out of court. Visitation plans can also include ex, or extended family members such as grandparents, aunts, uncles, etc. to ensure positive influence on the children in a diplomatic way. Here's an example: The parents decide when each family would get quality time with the kids, including grandparents. The ex mother in law (grandma) is to pick up and drop off the children on a specific day and time during her visits. But one week she has an argument with the mother and chooses to keep the kids for an extra few hours. A contract would help deescalate the situation and give the mother the legal ground to remind the grandmother that she is breaking a binding legal contract which the law can enforce. Usually, in cases such as these, the fear of enforcement is enough to prompt people to abide by the rules that were originally agreed upon.

Caretakers (Property/Animals): This is a good way to include a schedule of what responsibilities you are entrusting to the designated caretaker in your absence such as plants to be watered, animals to be fed, etc. along with what should not take place. This can be especially useful in events dealing with accidents due to an action that you specifically forbade or preventable matters that could've been avoided if your rules were followed.

Housekeepers: A person's home is a very private place and they have their own ways of doing things. Here is an illustration of why a contract would be beneficial in this matter. Person A decides that they are working so much and never has time for anything, so they hire Person B to come clean 3 times a week. Person A verbally tells Person B what is expected of them with some important directions regarding their laundry as their clothes are quite expensive and have specific care instructions. But, Person B forgets and everything goes in the washer together. This ruins $700 worth of clothing. Without a contract the chances of Person A collecting is slim as it once again goes back to he said she said and generally, one person word is equal to the other person's word in court. A contract listing the do's and don'ts would help Person A recover the compensation for damages.

Designing a Contract

The bottom line is simple. A contract protects your rights. Everyone has rights and if you fail to protect them then you can lose a lot in court. Pick anyone of the situations above, imagine the worse case scenario and your desire to see justice done. If you have a contract your rights are fully protected in a court of law and justice can be served in your favor. However, if you didn't have this essential protection you would likely not be awarded anything for your trouble and could end up paying more to the person that violated your trust. Always think twice before merely trusting people to do right by you, expect the unexpected and protect yourself from the start.

Always have your contracts drafted by a person that has the knowledge of the law, how a contract works and should be worded. Don't settle for one standard contract sold in stores, it is not a one size fits all deal. These documents should be tailored to fit your exact needs and do not have to cost a bundle. An attorney or legal document assistant can draw them up for you on virtually any subject. Of course, lawyers are often expensive. An LDA can create each simple contract for the above situations for approximately $10 per page. That is such a small price to pay when you think of the security it provides and how much money it can save you in the long run.