Monday, September 13, 2010

Creating a contract to protect yourself and your relationships

Many nutrition professionals consider contracts as something scary and a detail that they don’t need to concern themselves with. They don’t want to offend the other party, or want the other party to assume they mistrust them, yet the problem is not one of honesty, but one of protecting the relationship.

Why should you create a contract?
The obvious reason is to protect yourself. If you were to see clients in an MD office or sports clinic, you want all aspects of the agreement spelled out. If you are contracting with a corporation, you want to be very clear what you are doing, for what length of time and in exchange for what compensation.

A huge issue develops when friends decide to go into business or collaborate on a project together. Nothing will end a friendship faster than a misunderstanding around business! An oral agreement can include items/issues that each party may remember differently with the passage of time, yet if it is in writing, and the friends came to a mutual agreement on each item, the friends can refer back to that agreement.

Studies have shown that people tend to be unrealistically optimistic about the future of their personal relationships. It’s this optimism that leads to the importance in drawing up a contract when doing business with someone you have any type of relationship with.

What makes up a contract?
A contract can actually be a very simple document. In order for any contract to be legally binding, there are four basic requirements they all must have, written or oral:

1. Offer and acceptance:
a. An offer is a statement by a person that indicates a willingness to enter into a bargain on the terms stated.
b. An acceptance occurs when the person to whom the offer was addressed indicates a willingness to accept the proposed bargain.

For a dietitian, an example would include an offer to pay a certain price or percentage of business in exchange for space to see clients and acceptance of that offer from the person with the space.

2. Consideration:
a. This is anything of value that is exchanged between the parties. It can be money, property, a promise to do something or a promise to not do something. It literally means ‘a bargained-for exchange’. The requirement is met when one party gives up something of value in exchange for the other party’s giving up something of value.

An example would be the exchange that one person would provide space and the other person would pay a certain amount for the privilege of using that space. An important key is that both parties must provide something of value.

3. Both parties must have the capacity to enter into a contract:
a. This just means both parties must be mentally competent and not a minor

4. The contract must have a legal purpose:
a. This would be what the purpose of the contract is all about.

Using the above examples, the legal purpose of the contract is that the offeree is offering to pay the offeror a certain sum in exchange for the use of space.

A final section of all contracts should also include an ‘integration’ or ‘merger clause’. This is a statement at the end that states, “this agreement constitutes the entire agreement of the parties and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties.”

Consider a contract as a sign of potential growth for your business and a tool to enhance all of your professional agreements and collaborations. You are in business to succeed, and I strongly believe that contracts with all parties is one sure way to continue that success.

Marjorie Geiser, MBA, RD, NSCA-CPT
MEG Enterprises