A contract is simply an agreement that is legally enforceable. Generally speaking, to be enforceable there must be an exchange of promises: something for something.
The ’somethings’ can be money, services, property, rights... almost anything. A person who breaks a contractual promise may be sued. If they do not have a legal defence they may have to pay the other person compensation or comply with some other court order.
A contract can be spoken or in writing. It can even be implied by the conduct or the actions of the parties. For example, if it is obvious both people were acting on the basis of some agreement. Sometimes a contract can be made up of a number of different documents, emails, conversations, etc. Throughout your life you will probably enter into thousands of contracts without even realising it!

A few basic contract tips:

Get it in writing

Very few contracts are required to be in writing (exceptions include an assignment or exclusive licence of copyright). However, although most verbal contracts are enforceable, if there is a dispute it comes down to your word against theirs. Many disputes can be avoided by making sure at the start that you have recorded your agreement in writing.

If you want to, you can use a ’formal’ contract (the kind a lawyer would draft, or based on a sample contract. However it is usually not necessary to have any particular form of wording - you can simply write your agreement in plain language so that both of you understand it.
Some people are reluctant to put things in writing, but you should consider why?
Are they perhaps thinking of sliding out of the contract later? Or is it simply not their ’way’? You can explain to them that having a written contract is not a sign of distrust. Rather, the purpose of a written contract is to have a clear, unambiguous agreement that clarifies each party’s rights and obligations and, if they wish, to set out a procedure if something goes wrong.

If the other person still resists putting things in writing, you should, at the very least, keep your own notes of the verbal agreement. Better still, write them a follow-up letter in simple, non-threatening language confirming the arrangements.
Ask the other person to check the letter over and sign it if they agree with it. If they sign it, you have your written agreement. If they dispute it, you will have flushed out the misunderstandings. You can then amend the letter until you are both happy to sign it. Even if they ignore it, you may still be able to argue that they tacitly agreed to it by carrying on with the contract.
The bottom line is that any written evidence of the contract, even if it is just an invoice with terms noted, will help determine what was agreed. Selective amnesia is common in the absence of anything in writing.

Put EVERYTHING in it

If you do decide on a written contract, it is important to realise that the law generally presumes that a written contract is the whole agreement - so make sure that it is. Don’t leave out things that the other person has promised you as a goodwill gesture or that you are simply assuming will happen.
If the goodwill between you disappears later on it will be much easier to prove that the promise or assumption was part of the contract if it has been written into it. You should also have a plan for the ’worst case scenario’. Think of the worst thing that could happen and write in a safeguard to deal with it.

Is it a good deal for you?

The law generally doesn’t care if you make a rotten deal for yourself. Whether or not the contract is good or bad for your business, if you have signed the contract you will probably have to perform it. So while getting a contract in writing helps to make the terms of the agreement clear, it also makes it harder to wriggle out of.
Use your crystal ball and try to see what will happen under the contract if it all goes pear-shaped. Is the duration of the contract too long? Will you be paid in regular instalments or will you have to be patient and wait until the end? Do you have a guarantee that you will be properly attributed for your work? Can you unwind your relationship easily? Often a few simple amendments written into the contract and initialled by both parties can save a lot of grief further down the track.

You CAN negotiate

Sometimes you will be handed a formal-looking contract and told: ’this is our standard contract - take it or leave it’. You may feel that you have no bargaining power to negotiate better terms for yourself. However, remember: there is no such thing as a standard contract.
There is generally no legal reason why a contract cannot be negotiated. So read the contract carefully and check anything you are unsure of, or make suggestions if you wish to make changes. Sometimes you will be able to convince the other person to let you strike out a clause or a sentence or add in a rider. If they won’t agree to do that, you should strongly consider whether this deal is good for you. If it isn’t, walk away.

Get legal advice

Often you will be told that you must sign a contract within a very short time - even in front of them. Don’t give in to this kind of pressure. It is only reasonable that you be given sufficient time to get independent legal advice before you sign.
It is much harder to retreat from a bad agreement once you have signed it. You may find yourself with obligations you didn’t fully understand or didn’t even know about.
Don’t sign anything before you know exactly what you are agreeing to.

Do your research

The piece of paper you sign may be worthless if you are dealing with someone who is bankrupt or untrustworthy. Who is the other party? Are they a company or an individual? Who are you really entering into the contract with?
Ask around, check with the local library or Companies House or Credit broker.
What about the terms you are being offered? Are they consistent with the industry standard?

Don't give away more than you need

When you are dealing with your artistic assets such as copyright you should make sure you keep control of them and only give a licence for what is strictly necessary. Do you really need to assign all your copyright interests in the work? Would a licence giving them permission to use your work for limited purposes and/or for a limited time be more appropriate? Wouldn’t you prefer if they had to come back to you for permission for further uses? You can limit the licence by narrowly defining terms such as territory, duration and type of use.

Only promise what you can deliver

You may find yourself in trouble if you inadvertently agree to provide something you haven’t got. This can happen with copyright for example if you created something as an employee (and your employer is actually the copyright owner rather than you) or where you have already given someone an ’exclusive licence’ of that copyright. Check this and anything else you are agreeing to provide carefully so you are confident of your ability to deliver.

Keep a copy and read it often!

Signing the contract is evidence that you agreed to its terms. You will usually be bound to perform the agreement as it is written. For this reason it is a good idea to get two ’counterparts’ (identical originals) of the agreement signed by both parties. Each party then keeps one counterpart. At the very least, make sure you have a copy of the original agreement so that you have a record of what you have signed. There is no legal obligation for the other party to give you a copy of the agreement if you haven’t got one!