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What is a Contract? Part Two

This is more along the lines of how to communicate a contract, and how to alter a contract once the contract has started.

As stated in my first post about this subject. There are 3 ways to have a contract.

1 – Verbal :- I call an electrician to wire in a stove. The person on the phone tells me the price per hour and I agree to that price.

2 – By Indication:- I am standing on the side of the street and I want to get home. I see a Taxi drive past and I put up my hand to wave them down. The Taxi driver sees me and pulls over. The driver will ask me where I am going and He invites me into the Taxi. Or I get in the Taxi and he then asks me where I am going. This is the Offer stage. Then he will either start driving, which is the acceptance of the offer, or he will tell me that it is out of his zone or he does not want to go so far out of his way, which is the rejection of the offer. It is the same when you go to an Auction House.

3 – Written Contract :- All written contracts have a review clause, in the event it needs changing. However, written contracts are formalised verbal contracts, so that one person cannot claim that they have a bad memory. A written contract is made when the amounts are large or the time is long. Without going into all that I have already talked about in another post, I will add that written contracts is that is these times when people do not honour their word anymore are the best way to make an agreement over a longer amount of time and with greater sums of money. Commonly over $1000 in services and $5000 in goods. However this is flexible, I did buy a car for $10,000 on a handshake. The owner just would not let me take the car without proof that the money was transferred to his bank account first. Which was spoken about before the exchange.

Alteration of a Contract whilst a contract is in motion:-

This is what I really want to talk about. I just had a disagreement about Altering a contract without proper communication.

Lets look at good communication first.

I take my car in for service. The mechanic tells me that a service is $700 for a full service, he tells me what I get. Full oil change and filters replaced, differential oil change, wheel alignment, and lights checked. I say that is great, I leave the car there, then about an hour latter I get a phone call telling me that the breaks need changing and he will show me the old break pads when I get back, then he quotes me a price. I then ask him how many months can I still get out of the old breaks, He tells me that you could go for the next 3 month but he has the car on the hoist and it would be cheaper and faster to do it now. I agree to the price and the deal is done. We can see that the verbal contract has been changed and at the core of a new contract was made, increasing the service, the parts needed and the price. Full offer and acceptance was made with an explanation of why the contract needed alteration.

Now we look at bad communication.

I ask an electrician to wire in a new stove. A per-hour price was agreed on with a minimum of a 1-hour charge. I think to myself that this is a half-hour job and accept that offer. I am thinking that the old stove comes out and the 4 wires are then put back into the new stove. Two electricians come one being a trainee. I sit in another room while they do their job. I walk in and see that they cut the wires off at the wall and I do not see any wires coming out the walls. I ask what they are doing, I was told that the wires are not good for this stove. They then continue to take the roofing off part of the house to run new wires from the fuse box, I ask why? no explanation and the air was stressful. I was angry inside but keep my mouth shut not wanting to criticize their work. I do not know what they were doing nor why they are doing it. I have no idea about this type of work, I know I am an idiot when it comes to electricity. But an idiot can be educated. When they finish the job I ask them about how much extra will this job cost. They have no idea about the price.

About a week later I get a bill that is 7 times the agreed amount. I was furious. On the bill I see I got charged for 3 hours, wire, and a fuse. I had no idea about the fuse, or why new wires were needed. This is where a verbal contract fell down, no communication. There are a whole lot of “what if” statements that could come in here, the biggest one being is; what if this is totally out of my budget. I can cook with a microwave till I save up for the rewiring. Good communication helps educate the customer, justifies the extra work, and keeps a good relationship between all the parties. Now thinking about it, with good communication I would tell everyone how knowledgeable the electrician is, and he was great at keeping the house safe, I would have been happy to pay extra. However, right now all tradesmen especially electricians have all lost a little respect for me. Bad communication in a contract causes a bad reputation, unpaid invoices and potentially lost work.

Many years ago I was in this situation with my bad communication. I got a commission to move a house load of furniture to another city. I quoted $3000 to move all the items, I was thinking it was 1 truckload. It was 2 truck loads, I underestimated, and I sent the person an invoice for $6000. The client was pissed off. and now I see rightfully so. It ended up at consumer affairs and I was ordered to accept the $3000 as payment because that is what the contract was for. Likewise, Bad communications in any organisation equals unhappy people.

Don’t Make Assumptions!

There was one time I took a taxi from the Mechanic to my place of work. When I told the cab driver where I wanted to go he asked me if I have a preferred route. I liked this because he gave me an option to take the route that I thought would have the least amount of traffic. Most of the time I got a taxi the driver assumed the route and frankly I did not care that much. I did hear of a cab driver that did assume the route and the passenger did not want to go that route thinking that it would cost him more, thus put in a complaint about the driver.

Contracts either verbal or implied need to have reduce the assumptions as much as possible. We assume a lot in the first place. Does the customer have the funds to pay, is the driver capable of navigating the city, does the job description mean that’s all they do, are the instructions understood?

Bad Assumptions

A person was employed to clean up a the yards around the house. The front yard and the back yard. He was employed as a lawn mowing service. It was assumed that clean up was to take away all the garbage left by the former tenant, mow the grass and to trim back all the shrubs. At first that is all that the person did. But the lawn mowing service went one step more, He chopped down an apple tree and then chopped the grape vine down, both are but stumps in the ground now. Needles to say the landlord was furious and took her anger and frustrations out on me. I in tern informed the person employed to get the Lawn mowing service. Here we have a lack of communication and a bad assumption. Lawn Mowing Service gave a hint of what service was expected. and the instruction was to remove rubbish that was hidden in the grass. Lawn Mowing Service does not indicate in the job title that he chops trees down or removes vines. Perhaps trim them back to a reasonable state, but not reduce them to a stump.

I once employed a man to help me move furniture and to set up the Auction house. We had just taken delivery of a lot, 20 or more pine pantries. I was at the truck doing the stock take with the driver and I told the employee to go and put the handle on the pantries and pointed in the general direction of the furniture. He went over with a screwdriver and started to put the handles on. I saw he was ok and continued talking with the driver asking when the next shipment was coming in. I was about half an hour with the driver. The employee should have been finished with the handles. I went over and said “Well done”. I then looked up the row of pantries and only one had its handles on. “What, I told you to put the handles on the pantries, not just the one I pointed to, and you just stood here till I was done waiting”?

Needless to say, there are times people assume too much and other times way too little. Always ask for clarification. All it takes is one or two questions. You see the image of what needs to be done in one person’s imagination may be different to the person employing you to do a job.

When is a Good time to write agreements down?

To some point, this depends on the length of time that it takes between the completion of the job and the time of payment. Along with how many alterations to the agreement there is.

To be prudent it is a good idea to carry with you a Diary, Day planner, or Note Book, so you can jot down the time and date for any agreement and or alterations. Then when you get back to the office you can staple it to your invoices or scan and upload it and attach it to an invoice in your accounting package. Furthermore, if you want a good paper trail you email that scanned paper to your customer, then ask if this is correct. Again this is about communication so that all parties are on the same page. Not only are their good customer relations, but this will also save you if there is ever a dispute in the invoice costings. and if it goes to court it will save you from expensive litigation.

One of the hard lessons I learnt in my younger years was the fact that neither my client or myself were on the same page. I agreed to move all his furniture from one city to another. I gave him a quote and this was agreed upon. I could see that a second truckload was needed, but the client said it is not an issue and he could move it with his trailer. I said to him that I could do it. No mention of money or time was in the discussion. I thought he would pay me for a second load, and in hindsight, He thought that I was giving him a free service. Most likely because we got on so well. Well, it all ended up in a tribunal and it was judged in the court that the second truckload was not in the original agreement and the ruling went to my customer, I got paid for the first truckload and the second truckload and my labour he got for free. So now I not only state what is in the agreement but I ask them if is that correct, and then I write it down. I have been known to then ask the customer to sign the notebook just so we are on the same page. This really depends on the price and the time the job takes to do.

I was just thinking about taxi drivers or Uber drivers. This is all done with them as well. When you ring up or request a ride, the pickup point and destination is recorded. At the end of the trip with some services, you can leave feedback on your experience and the service supplied. Likewise, a lawn keeper will keep a diary on their calendar for the start time and finish time for a job, so when they get back to their office they can enter it into their invoice system.

Written proof of a purchase.

This too is a contract. you want to sell item X for $n, I agree and pay you $n for item X. No paperwork no nothing. I have the item you have the money. The next day the police come and take the item because it was stolen and then I get charged with receiving stolen goods. Or, the finance company takes the item and I did not know it was fully paid off.

I just recently bought a motorbike from a fella I met on Facebook. I liked the bike and agreed to pay his asking price as in my research it was a fair market value. When I was satisfied I got a bland A4 paper and started writing the bill of sale. I Signed it and so did he. He took a photo of it and as the Buyer, I kept the original.

This is what I wrote down:-

Date: 1/1/2022 – Time 2:30pm
I Jack Smith of 1 First Street, Orange, Drivers License number 1234567 have sold the Kawasaki Vulcan 650s with the VIN XXXXXXXX for the price of $n, having a full and clear title, to Frank Smolle of 2 Second Street, Millthorpe, Drivers License number 1234567.

NDIS Service Agreements

NDIS = National Disability Insurance Scheme.

Here is a nightmare of an agreement. I am sorry to say but all the people that are not affiliated as an employee of a larger NDIS provider has no idea about contract law. I have heard people working as service providers state that a “service agreement is a contract of sorts. So it is a contract but it is not a contract”. This is not so. a service agreement is a contract through and through. It has all the components of a contract. Let’s go through what is on a service agreement step by step.

  • Start of the service agreement date. This is the date that the service starts.
  • The names of the parties in the contract. The service provider and the client’s name and each other’s contact details..
  • The duration of the service agreement. This is usually the end date of the NDIS plan. If the NDIS plan is a two-year plan the end date for the service is the date that the NDIS plan ends. Why? Because there is no guarantee that the NDIA will fund the same service in the next plan.
  • The NDIS Number and all the details of where to send the invoice, so that the payment can be given after the service is given.
  • A description of what the service is. This could be for domestic service, such as cleaning the house. Community access is going to play tenpin bowls, taking the client to an organised activity, or even shopping, or to appointments. Lawn mowing can also be in the agreement.
  • Conditions of the contract. These are the conditions of either party to get out of the contract. such as no communication for a set amount of reasonable time. If the provider cannot get in contact with the client for a month the provider needs to give a written cessation letter stating that if there is no contact within 30 days the service will be ceased.
  • A statement that reads that once the service is delivered and the cancellation takes place, The service will still be charged after the cancellation date. This is because some services invoice the NDIS or Plan Manager once a month.
  • Temporary cancellation of dated service. This is often a 48-hour notification that the client does not want to have the service on a certain day. For example, the client does not want to be picked up to go shopping on Wednesday. The client needs to inform the service provider 2 days beforehand. This means that if the client does not inform the provider on Monday the client will still be charged for the full service even if the client does not use the service. There are some that will insist on 7 days and others service a full month’s notice. This depends on the type of service.
  • The price of the service. This is always based on an hourly rate, with a minimum amount of hours worked on any one day. Thus it will look like this; The hourly rate for domestic help will be $61.17 per hour with a minimum of 2 hours of work., twice a week. 2 hours on Tuesday from 1300 to 1500 and the same on Thursday.
  • There may be an alteration condition. This is the amount of notification time that is needed to change the time or day the service will change to. So if the client wants to change the Tuesday service to Wednesday 7 days notice may be needed. Alternatively, this is a verbal aspect of the contract, and not written at all. So one day the client asks, “Next week can we do this on Wednesday?”. The provider will then say I will see what I can do, Yes or No, I have another client that I cannot change the appointment with.
  • And finally a dated signature of the client’s agreement to the contract.

I challenge anyone to get a service provider to shorten their cancellation conditions or the minimum hours they work on any one day. If you only want one hour they will still charge for two.

How ever you make a contract, they are the rules of the game. if you ever change the rules of any game you play mid way through the game with a child. You will soon find out about it, because they will tell you loudly and often with tears. Now do the same with an adult, change the rules in a contract mid way through the exchanging money with goods or services, you will either have a fight in court or a punch up.

So if you make a contract, stick to the rules of the contract and no one will get upset. Contracts on paper are only on paper if the courts needs get involved. Written contracts are there to have the rules written down. This is the same when Football is played all over the world and have matches all over the world. This can only happen with the rules written down. Contracts are the same, you can make a contract (agreement) with anyone on the other side of the planet. As long as we know the rules of the game, we are happy.

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