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How to Read a Contract (Without Falling Asleep)

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SarahSays

The word “contract” has different effects on different people. To some, it causes eyes to glaze over. To others, the word causes blood pressure to rise. Your brain may fill with visions of lawyers, legal mumbo jumbo, and piles of paper packed with legal mumbo jumbo.

To me, contracts aren’t boring or scary — they’re interesting and smart. The purpose of most contracts is to create realistic expectations, for each side to know his or her responsibilities, and plan for what will happen if something goes awry.

You probably entered into a contract today — from your sleep-deprived payment for a simple cup of coffee to your lease agreement with your landlord. Or maybe you and your roommate agreed that you’ll disinfect the bathroom this week if she’ll clean it next week. Whenever two people exchange promises (like money for coffee or scrubbing for scrubbing), a contract is formed.

The goal of this post is to provide information for Etsy sellers when reading a simple contract, such as a vendor agreement, freelance agreement, wholesale contract, a consignment agreement, or a custom order agreement. Remember that contract law varies from place to place and generally, contracts may be enforceable whether they are oral or in writing. Also, for a contract that will greatly affect you or your business, you may want to speak with an expert, like a lawyer.

Step 1: Get Mentally Prepared

Before you read a contract, think about what you expect to read. What responsibilities do you expect to have? What do you expect the other party to do? What do you absolutely need? What could go wrong?

Make a list before reading one word of the contract. After you read the contract, review your list.

Step 2: Print the Contract

I know, I know, trees provide shade and homes for birds, but they also provide a convenient surface for contract printing, and they save me stress. Thank you Mr. and Mrs. Tree. Every word in a contract matters, and, in all seriousness, if you’re anything like me, you’ll find it easier to read pages of paper than a computer monitor, iPad, or smartphone. Feel free to shred and recycle or make a craft project with your contract drafts.

Step 3: Read the Contract

Unless you’re not fluent in the contract’s language, read every word. If you’re not fluent in the contract’s language, get some assistance. Sure, reading a contract may not be as entertaining as soaking in your favorite novel or magazine, but this writing has likely consequences on you or your business.

Find a quiet corner in the world and read the contract thoroughly with a pen in your hand. Use that pen to underline key sections, take notes in margins, and write questions. Then, examine your notes from Step 1: Get Mentally Prepared. If possible, read the contract again.

Step 4: Pay Attention to the Language

A contract comes down to the details. What will you do, and what will the other party do? You have to be comfortable with these details. Here are some terms that are commonly found in business contracts:

      • Term/Termination: When does the contract begin and when does it end? How long will you have this agreement? What if someone wants to end the agreement?
      • Renew: What happens at the end of the agreement? Some contracts have one Term (like, the contract is good for a year) and then after that time, if you or the other party doesn’t properly end the agreement, the contract will automatically extend for another period of time. If your contract automatically renews, how does this work? What if you want to change some of the promises?
      • Indemnity: In the event there’s a lawsuit, will you protect the other company? Will they protect you?
      • Exclusivity: Is this the only agreement you will have about this specific situation? What if you want to enter into similar agreements?
      • Confidentiality: Is this agreement, or its details, a secret? Who needs to keep things secret?
      • Fees / Payment: If money is exchanging hands, how much? When is the money exchanging hands? How is this payment conducted?
      • Breach: What responsibilities do you have? What responsibilities does the other party have? If something goes wrong or someone fails to do something required in the contract, what will happen?

Step 5: Discuss the Contract With the Other Party

Now that you understand the contract, your responsibilities, and the other party’s responsibilities, you may have some negotiating to do. Get your questions and comments together and set up a time to talk with the other side. Be your own advocate. Don’t be afraid to ask for what you want. Also, do not make assumptions; if you have questions, talk things out. And, as always, remember to keep things professional.

Depending on your negotiations, the contract may need revisions. And remember, if you cannot agree on the terms or you do not understand the agreement, do not sign the contract. You may also want to get a second opinion or have an expert (like a lawyer) review the contract.

Step 6: Save a Signed Copy!

When you’re finished negotiating and you sign the contract, remember to keep an entire copy (signed by the other side) for your own records.

By following this information, you will better be prepared the next time you’re faced with the exciting contract.

What kinds of contracts are part of your business? Share your experiences in comments.

Disclaimer:
This information is for educational and informational purposes only. The content should not be construed as legal advice. The author and Etsy disclaim all responsibility for any and all losses, damages, or causes of action that may arise or be connected with the use of these materials. Please consult a licensed attorney in your area with specific legal questions or concerns.

Seller Handbook Best-Of Archives

Sarah Feingold is Etsy's in-house attorney. She is also a jeweler with an extreme sweet tooth.

  • Ryanplz

    Ryan Wyrick from rareattitude says:

    this is excellent information! very helpful and useful. i'm really glad you put step 6 in there! it's incredibly important in case the other party of the contract tries changing things without your approval!

    1 year ago

  • FireIslandSoap

    Billy Bubbles from FireIslandSoap says:

    Gnarly tips! I never used to read the fine print - now I'm ready! Booya! Thanks Sarah!

    1 year ago

  • mattyhandmadecrafts

    Matejka Max from NattyMatty says:

    "Get Mentally Prepared"...That`s a good one!!!

    1 year ago

  • richdon1

    Rich and Dona from TheCottageMouse says:

    This post is very informational. I had a bit of a mess when I purchased my first house. Something I could do nothing about because I signed the contract and didn't fully understand what I was signing. BEWARE, just because you have a lawyer does not mean all will go well. I had one and apparently he did not read the contract closely either. Make sure your lawyer does, and have others, close family and friends read the contract as well. A good proof reader in very valuable....

    1 year ago

  • JewelrybyDorothy

    JewelrybyDorothy from JewelrybyDorothy says:

    Great information! Thank you for sharing!

    1 year ago

  • 6catsart

    Corinne Aelbers from 6catsart says:

    I just went through this process with a licensing company and it is very, very important to understand what you are agreeing t. Do rely on a lawyer or friends to do all the work for you, they can help but they are not signing the contract you are. If you do not understand something then find out what it means. There is lots of helpful information you can find on artists contracts, I used the book Artist's Market as a reference. I also read the contract several times over several days and made lots of notes. The company and I also went through several emails and phone calls to make sure we were both on the same page before anything was signed.

    1 year ago

  • lilyblueboston

    Caitlin and Lily Edge from lilyblues says:

    Great tips. Thank you!

    1 year ago

  • 6catsart

    Corinne Aelbers from 6catsart says:

    typos . . . I have not had my coffee yet this morning . . . understand what you are agreeing to. Do not rely on a lawyer or friends to do all the work for you Ask as often as necessary before signing.

    1 year ago

  • deekish

    Deeksha Lakshmi from TheColorWagon says:

    I have to read contracts each time I exhibit my artworks in a gallery and the contracts are around 4 to 6 pages long. Initially I found it very hard to understand but gradually I learnt which parts to look at and confirm before signing.

    1 year ago

  • PaintStyle

    Viktoria and Elena from LekaArt says:

    Thank you, it's useful :) And I usually fell asleep when reading contracts, The only thing that can help me is discussing :D

    1 year ago

  • agebo

    Ann Cosgrove from acbcDesign says:

    Great reminders! It's up to each of us to be sure that we understand any agreement we go into - and that you dot all those I's and cross all those T's.

    1 year ago

  • admspeicher
  • MegansMenagerie

    Megan from MegansMenagerie says:

    Great information! They can be tough to get through!

    1 year ago

  • fbstudiovt

    Laura Hale from FoundBeautyStudioArt says:

    This is a great list. Thanks for sharing it! I come from a long line of lawyers and having spent my entire young life watching them negotiate contracts for clients, and then managing negotiations for my own work as an adult, this is spot on. If you don't know what you're signing, don't sign it! Asking questions is not a sign of stupidity - it's a sign of intelligence.

    1 year ago

  • 6catsart

    Corinne Aelbers from 6catsart says:

    I just thought of something else to add . . . It is just as important to understand what has been left out of a contract as well . . example I had to clarify who was responsible for insuring my work enroute and when it was shipped back to me, it was not written in the contract. The cost of the shipping was is the contract but nothing was mentioned about insuring the work.

    1 year ago

  • auntjanecan

    Jane Priser from JanePriserArts says:

    Great advice!

    1 year ago

  • SHOPPENBROOKFARMS

    SHOPPENBROOKFARMS from SHOPPENBROOKFARMS says:

    We recently had a dear friend - who also happened to be a fine and compasionate lawyer - die. He once explained to us that in his early years of law school. his" contracts 101" professor told his class that the perfect contract would filll the library of congress and that the professor's job was to teach them how to read such a contract and find the loopholes! He would put a finger on every single word as he read a contract.

    1 year ago

  • Parachute425

    Parachute425 from Parachute425 says:

    Zzzzzzzzzzzz this is why I love my lawyer

    1 year ago

  • LivingVintage

    LivingVintage from LivingVintage says:

    Good advice! Be prepared to walk away if you can't get your questions answered to your satisifaction. A contract is better than no contract, but it's still not a guarantee.

    1 year ago

  • lmouer

    Lynsey from lmouer says:

    Great advice! Thank you!

    1 year ago

  • sarahmoon503

    Sarah from Birchmoonrocksfibers says:

    I am guilty of skimming, good reminder to pay more attention to every word. Thanks for the help!

    1 year ago

  • INeedAStitch

    Katy from INeedAStitch says:

    very informative- thanks!

    1 year ago

  • sukran

    Sukran Kirtis from SukranKirtisJewelry says:

    very necessary info, everyone should read, Thank you

    1 year ago

  • NirvanaRoad

    Lisa from NirvanaRoad says:

    This was extremely helpful and something that I will refer to time and again.

    1 year ago

  • ikabags

    IKA PARIS from ikabags says:

    Thanks for great advice !

    1 year ago

  • josephbjohnston1

    Joseph B Johnston from ManzanitaStudios says:

    Thank you! This information was very helpful and the way it was delivered was excellent! It kept my attention the whole time! Great Job! Thanks for taking time to write it!

    1 year ago

  • WoodenItBeadLovely

    Leslie M from WoodenItBeadLovely says:

    Hate to admit it but contracts do make me sleepy! Thanks for the wakeup! I will be very careful in the future. Good article - thanks Sarah!

    1 year ago

  • WoodenItBeadLovely

    Leslie M from WoodenItBeadLovely says:

    Hate to admit it but contracts and legalize do make me sleepy! Thanks for the wakeup! I will be more careful in the future. Good article - thanks Sarah!

    1 year ago

  • karlyrose1

    WhiteKittenCreations from WhiteKittenCreations says:

    Great information. Learn something new every day.

    1 year ago

  • GeorgieGirlLLC

    D George from GeorgieGirlLLC says:

    How true on contracts, stick to it and don't let the other person slide one inch, you may need to real them back in. Great post!!!

    1 year ago

  • GeorgieGirlLLC

    D George from GeorgieGirlLLC says:

    Should have bee reel instead of real.

    1 year ago

  • dimlim

    Ragga Katla from Dimlim says:

    I think someone at Etsy must be spying on me because the blog posts are so spot on for me lately it feels like they are written for me personally. Im printing out a whole bunch of contracts AND this article. I might have it laminated.

    1 year ago

  • ariella42

    Ariella Carver from HausofAriella says:

    I just finished the contracts foundation portion of my bar prep course, and it made me smile to see this in my inbox :) After a day of reading ridiculous scenarios, it's nice to have a reminder of the fact that contracts affect people in the real world (and the Etsy-verse) too.

    1 year ago

  • Dogdohr

    Joanne Dohr from Dogdohr says:

    Very useful advice. Read every word!

    1 year ago

  • ForTheLoveOfFrance

    Claudia Violette from ForTheLoveOfFrance says:

    Thank you Sarah for writing such wonderful post about contracts. I am sure I will refer back to this time and again... merci beaucoup encore :-)

    1 year ago

  • hirschmj

    Mimi Hirsch from MimiDesign20 says:

    For us artsy types, it can be difficult to get through the business stuff. I dread it but know that I have to be careful. This was so helpful for me. Thanks!

    1 year ago

  • ArtByMarilyn

    Marilyn R. Meier-O'Brien from ArtByMarilyn says:

    TU so much. I have to read and reread as I have a tbi. TU again. Marilyn

    1 year ago

  • doncreate

    Dawn Mayo from Donellensvintage says:

    Thank you so much every day I'm finding I have so much more to learn....

    1 year ago

  • dianeborgmann

    Diane from BorgmannsCreations says:

    Helpful tips , thanks for the info.

    1 year ago

  • Youbabyme

    Ardlee from Youbabyme says:

    I was offered a wholesale gig but it fell through. I am actually glad because I need to do a lot more reseach on it. Thank you for the info...this is a great start!

    1 year ago

  • whateverworks

    Andrea Nichole Still from WhateverWorks says:

    Contracts are interesting and smart?! I will try to remember that next time I must read one. Reading fine print is something I try to do with mixed success. I managed to read text books in college so I will treat contracts the same way, and use your very helpful hints of taking notes and underlining Thanks for the advice!

    1 year ago

  • ltong

    ling tong from STUDDEDCASESBAR says:

    Helpful tips , thanks for the info.

    1 year ago

  • lucygalleria

    Lucy from lucygalleria says:

    Thank you for taking the time to write it and to share it. Excellent advice.

    1 year ago

  • mazedasastoat

    mazedasastoat from mazedasastoat says:

    Great advice about contracts, can we have some on protecting our intellectual property next please?

    1 year ago

  • FreshRetroGallery

    Elizabeth Knaus from FreshRetroGallery says:

    The first contract I entered was marriage many years ago. It's a commitment made with integrity being necessary to do what it takes to follow through. In Etsy selling, writing a policy is a way to help make sure everyone is on the same page. Questions that pop up help us add words as we go. One can never be totally prepared for things that could go wrong, but we learn as we go. We learn to trust and be trustworthy. There's freedom to step out of our comfort zone when we have a promise to remember, we are willing to improve and work at things.

    1 year ago

  • DAGhandbags

    Rose Duffy from RosesHandbags says:

    Thanks for the helpful tips. Step 4 is especially helpful as a checklist for things to address in a contract.

    1 year ago

  • whispersbygeorgia

    Georgia from UniqueThingsChicago says:

    Keep all the paperwork you have and continue to receive during the life of your license agreement. If anything goes wrong, or if you are ripped off - you will need these documents in court. I once made a book with all of my documents in order, and according to dates, intermixed with my story of the events. This book turned out to be the deciding factor for an attorney to take my case against the infringing company. After 10 years, a trial by jury, and a legal fight all the way to the United States Supreme Court - we won.

    1 year ago

  • TouchTheMoon

    Eleni from TouchTheMoon says:

    To be honest I didn't expect so when I started reading the post, but it's a quite good one and with solid and sensible advice!

    1 year ago

  • huntkathleen

    Kathleen Hunt from KatsKoolStuff says:

    Thanks so much, this is great info :) KAT

    1 year ago

  • magsbeadscreation

    Melani Anastasia from magsbeadscreation says:

    Great information. Thanks!

    1 year ago

  • LittleWomenSisters

    Pennington Girls from LittleWomenSisters says:

    Great tips! We're blessed to have a lawyer for a dad, and a brother currently in law school. :D Our dad is really good at proofreading too, so hopefully that will lighten the load if we ever need to make wholesale contracts or something like that. It's comforting to see, however, that there is a way for me to actually read and understand those contracts without getting completely overwhelmed. Thank you so much for this post! :) ~Patience from Little Women

    1 year ago

  • julespalms

    Jules Palms from JulesBags says:

    Great Help !! thanks for sharing..Jules

    1 year ago

  • differentouch

    Papia Haque from Differentouch says:

    Love this informaron.

    1 year ago

  • differentouch

    Papia Haque from Differentouch says:

    I mean information.

    1 year ago

  • Softshellbodyshop

    Shannon Rea from BarmaidSoapCompany says:

    This article came at just the right time! Thanks for the advice!

    1 year ago

  • dharmeshshah

    Dharmesh Shah from MiMiKri9 says:

    Aweosme....Thanks

    1 year ago

  • aressa

    aressa from OriginalBridalHanger says:

    Great advice that I truly believe in....

    1 year ago

  • janakoskela

    Jana Koskela from janakoskela says:

    The information was great for me. I learned so much from it.

    1 year ago

  • HandicraftsByIris

    Iris Collins from HandicraftsByIris says:

    I haven't found reading my contracts as a cure for insomnia; it pays to read all the small print and get everything nailed down in writing so everyone remembers what's supposed to be happening... on both sides.

    1 year ago

  • underneaththeoaktree

    Natalie Atkins from underneaththeoaktree says:

    I guess you should know what exactly you're signing up for! Great tips, thanks.

    1 year ago

  • sueneel

    Sue Neel from Arcabeadies says:

    Thank you for posting this. While this is not necessarily contractual, I think it is related and would appreciate feedback: I was recently asked if someone could teach my design in their area. She said they would re-write my instructions, photos, etc...and give me credit. I asked her to buy a copy of my Teaching Agreement. A simple contract I had drawn up to help protect my design and rights to it...and never heard from her again. The design she was asking about was published in a national craft magazine, so really anyone can make it and presumably sell it. But this lady wants to make money off of registering people for classes and selling materials to them too. I have had other beading friends get similar requests, thinking there would be no harm, only to later compete for spaces at craft shows, teaching in shops, and people selling instruction/material kits for THEIR work... I'm in business too! and worked hard to create something that got national notice. I don't think asking for $$ in exchange for allowing you to make $$ off my design is out of the question, and I do not expect to find myself competing for business with you on my design either, so I have a few simple terms to help prevent that from happening. (e.g. Don't teach it, or do shows with it in my area, and send me a copy of what you put my name on.) How do you crafters feel? Have you ever had this happen? What/How did you handle it?

    1 year ago

  • mydlass

    James ding from mydlass says:

    really helpful!! thanks

    1 year ago