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Contracts and Selling Chainmaille
Article © MAIL User: lorraine

Why Write a Contract?
A written contract is not a guarantee that someone won't breach an agreement you have with them. People sometimes breach contracts no matter what you do, and there are no guarantees against it. So why write a contract? Contracts come into play if/when communication between parties breaks down, you claim that the contract was breached, and you need to prove it to the satisfaction of a judge in a court of law in order to enforce it. A written contract is your proof to a judge of what the terms of the contract are and whether all parties agreed to those terms (they call this "a meeting of the minds" in legalese.) Then it's up to the judge to decide how the contract will be enforced. Doing business without written contracts (even if it is just a very simple one) is foolish and will eventually turn around and bite you in the butt later.

Contract and Business Law
In the US, sales contracts between people in differing states are legal and enforceable. Certain things won't be enforceable, such as contracting to deal with goods that are controlled (like alcohol) or illegal (like heroin). But since we are talking about selling chainmaille, and chainmaille is not illegal to sell or trade in the US, you are fine. Even if the contract contains an illegal clause (for instance, you write something in there where you are trying to scam the government out of income taxes), that does not automatically negate the entire contract. (Doing so will most assuredly NOT put the judge in a good mood, so I recommend you NOT do that.) The judge can still enforce the rest of the contract, effectively ignoring the illegal part and holding the parties responsible for the rest of the agreement. Business law and contract law are different in other countries. However, they are very similar in Canada and Britain (and many other European countries) because they originated from the same basic common law. But there are some differences that contracting parties are responsible for knowing before entering into them. Do your research.

What is a Contract?
Contracts must have a minimum of three things to be enforceable in court.
1. Mutual consent ("a meeting of the minds") - both parties understand what the contract covers.
1. An offer and an acceptance of that offer.
2. Mutual consideration - the exchange of something that has value, such as money for goods, or goods for goods, etc.

Writing a Contract
The details of a contract are ALWAYS negotiable. Just because someone draws up a contract and hands it to you, that doesn't mean you have to sign it. You can always negotiate the details. If someone is unwilling to negotiate, and you are not happy with the terms of the contract, don't sign it. Do business with someone else.

You don't have to be a lawyer to write a contract that is enforceable. Don't attempt to use "legalese". Write it clearly and specifically. Don't use terms like "in a timely manner" or "where ever possible". They are meaningless. Instead, write things like "within 30 days" or "at all times". Don't leave things open-ended or subject to wild interpretation.

Consignment Contracts
As far as consignment contracts with shops that you cannot physically keep track of goes, here are some things to consider. This is by no means comprehensive.

1. Don't exchange goods until you have a written contract that is signed by the retail shop owner in your hot little hands. I don't care if the shop owner is your mother, your BFF, your uncle Vinny from NJ, or someone you've never met. You NEED a written contract. Mailing a signed contract is not difficult, time consuming, or expensive. Insist on it. A written contract will not protect you from a breach. However, a written contract is the only tangible proof you have of an agreement when you are forced to sue for breach of contract and you are standing in front of a judge asking for enforcement.

2. Take detailed pictures of all items that you release to a shop. Write a detailed description of each item. Package the items securely and use insured shipping. Insist on an email from the shop that they received all the items and that they arrived undamaged. If they say they cannot do that because the items are damaged, tell them to send everything back. Archive all email and voice mail traffic for when you need to prove in court that you upheld your end of the contract.

3. You need to know what percentage of the sales price the shop is taking in commission. You need to know if they are charging any other fees ("administration fees", "bookkeeping fees", etc.) Specify that if the fee is not written into the contract, you are not responsible for it. Specify that the shop is responsible for paying any state taxes owed on the sale. You also need to know what they set as the sales price for each item. If they plan on selling your items for less than you need in order to make a profit, well then, that's a deal breaker. You also need to try to protect yourself from the possibility of them selling the item for more than they tell you they sold it for, and cheating you out of your percentage of the sale. This is very important when you cannot physically walk into the store and check to see what the price tag actually says.

4. Set a time limit on how long the items will remain in the store unsold. Be specific. Once that time period is up and the item has not sold, you need to either get the item back, or renegotiate the contract. Don't leave this part open. You will leave yourself very vulnerable to never getting the item back. Remember, "in a timely manner" is meaningless. "In six months from the date of receipt" is specific and enforceable in court.

5. Specify how you are to receive payment, and how long the shop has after the sale of the item to pay you. Will it be a check drawn on the shop's business account (familiarize yourself with the acronym DBA. It stands for "doing business as"), with the name of the payee specified? Will it be through PayPal? Will you give them 30 days from the date of sale? Say so in the contract. Specifically.

6. One of the reasons the shop is taking a percentage of your sales is that they are taking on the responsibilities of running a shop and you are not. You get a place to sell your goods, but you don't have to worry about renting space, hiring employees, displaying the goods, security and anti-theft, paying the light bill, paying the insurance premiums, etc. I recommend that, because you have absolutely no control over missing/stolen/lost/damaged items, you write into the contract that the shop is responsible for any missing/stolen/lost/damaged items. If the item is not sold within the agreed upon time and they cannot or will not return the item to you, then specify in the contract that the shop owes you the commission on that item. The items you have in their shop should be protected just like everything else in their shop. A responsible store owner has insurance. Don't do business with a store owner who balks at being responsible for this. If the item is returned damaged (you have a picture of what the item looked like when you sent it, and an email saying the shop received the item undamaged, right?), then specify in the contract exactly how that will be handled. For instance, if the item is returned damaged, you will assess the cost of repairing the item, if it can be repaired, and the store is responsible for paying that amount to you.

7. If the shop goes out of business or files for bankruptcy, yes, you still have the contract. However, you are most likely in the back of a very long line of people who want to get their money/items back. In all likelihood, by the time the courts get to you (the little guy), they have sold anything and everything of value, the money is gone, and you will be out of luck. Unfortunately, this is not uncommon.

The Usual Disclaimers
I'm sure I have forgotten something. I'm not a lawyer. This isn't comprehensive. Blah, blah, blah. Again, GET EVERYTHING IN WRITING! If you are going to do business with people, you have to be a grown-up about it and protect yourself. If you do business long enough, it is no longer a matter of if, but when someone will breach a contract. The only person who will take the time to protect you (aside from paying an expensive lawyer to do it for you) and get the contract enforced, is you. And it has been my experience that if people can't see you, they sometimes feel more justified in taking advantage of you. So, let's be careful out there... okay?
Original URL: http://www.mailleartisans.org/articles/articledisplay.php?key=624