Chances are good that you've agreed to a contract or two in your time. When you signed up for an email account, you were bound to a contract. When you joined Elfwood or DeviantArt, you agreed to a contract. When you got a job, or had utilities hooked up at your apartment, you got a contract. Even that time you agreed to buy your neighbor's old lawnmower for $10, you probably had a contract.

What's a contract?

Wait a second, you might protest. I didn't sign anything when I bought my neighbor's lawnmower! I didn't sign anything when I got a gallery at Elfwood, either!

Perhaps the most common misconception about a contract is that it must be a hardcopy, signed document. Actually, an agreement doesn't need to be in writing at all to satisfy the requirements of being a contract.*

There are four parts that define a contract. Any agreement - written, verbal or otherwise - that meets these four requirements is a contract and is legally binding.

Agency: Basically, to fulfill this requirement of a contract, you have to be the person who is able to make the agreement. To make an agreement on behalf of someone, I have to be their agent, or have 'agency.' I can't sign a contract for my friend Bob unless I have a previous contract with Bob naming me as his agent. I can't enter into a contract promising rights to artwork that I don't actually have rights to. An agreement I make is only a contract if I have the right to make such an agreement.

Legality: Contrary to popular belief, a 'hit' cannot be a legal contract, because the agreement is for something that is not legal. (eg: killing someone!) Other things that might not qualify for contracts are agreements that lead to monopolies or price fixing, trade of illegal substances, services or items, or agreements that are otherwise against the law. It is part of the law that all contracts of a monetary nature (ie: exchanging money for goods or service) of more than $500 must be in writing.

Due Consideration: If I go up to someone and say 'here, sign this contract,' and they scrawl a signature on a page without reading it, it's not a binding contract. There has to be a 'meeting of the minds' for a contract to occur. Both parties need to be on the same page about what is going on. When written, you'll usually find a line in the contract that says 'I have read and understand these terms.'

Agreement: This is probably the most straightforward of the four requirements. If I offer a contract to Bob, and he says 'I'll think about it,' there's no contract, and neither one of us bound to anything.

Verbal Contracts

This sort of contract occurs all the time. You're looking at a lamp at a garage sale, the desperate saleslady offers to throw in the table for free.

"It's kinda big," you say reluctantly. "I don't have a way to get it home."

"I'll deliver it," she says promptly.

"Okay!"

Unless that's actually her friend Joe's table, you both have agency. You've discussed terms, so you both understand what is being exchanged: your money for her lamp and the table, delivered. The exchange is legal. And you've accepted the offer.

Bingo, you have a contract.

Scary User Agreements

When you sign up for an online gallery, or accept user terms for software, there are generally a couple of pages of legal mumbo jumbo.

One of the generic terms of agreement you will find people have the most grief with goes something like this:

By submitting, posting or displaying any Materials on or through The Service In Question, you automatically grant to us a worldwide, non-exclusive, sublicenseable, transferable, royalty-free, perpetual, irrevocable right to copy, distribute, create derivative works of, publicly perform and display such Materials.

Why such a sweeping, all-encompassing statement? The simple truth is: to cover their butts.

Pretend you have a little non-profit gallery site. You show someone's art. You've just publicly displayed and distributed it. You put text ads up on the page with their art for a little bit of return on your server expenses. You've just profited using their work without paying royalties. You do a site backup. Right there, you've copied the work. You take a screenshot of one of the pages that has thumbnails of a lot of work by different artists and make promotional mousepads of that image available at an on-demand storefront. You've just created a derivative - sublicensed and distributed for profit.

As an artist, this kind of agreement for a web gallery should not worry you. You are not providing them with files that will produce decent prints or products, and galleries that attempt to profit illicitly from an artists work are very quickly exposed and shut down.

Term definitions (or, 100 ways to say "We're not responsible!")

At-will: An at-will contract is one that either party can choose to bring to an end at any time.

Good faith: You'll often find a phrase along the lines of 'the parties enter this contract in good faith,' which essentially means, 'we both think this is beneficial, and one person is not out to screw the other.' It's one of those broad, vague statements that expresses that maybe the contract wasn't written by lawyers, and maybe there are loopholes, but nobody's going to go out of their way to find them to take unfair advantage of someone else. It is also a term used to require partial and fair compensation if one party completes part of a job and something goes wrong and the project cannot be completed, resulting in a breach of contract.

Non-exclusive/exclusive: Often applied to print rights, these terms indicate whether or not the receiving party is the only person who will have these rights, or whether the artist can print their own work or grant rights to someone else as well.

First North American Print Rights: Exactly as it breaks down, this is a requirement for first print rights in North America. 'Print' has come to include publication on the Internet, and the Internet is considered world-wide. Most publications looking for work will also specify a waiting period - often one or two publication cycles of their periodical - before you can republish.

Royalty-free: You don't get paid.

Sublicenseable: The party you are granting rights to can turn around and grant the rights to someone else. This will often be thrown in to cover their right to use your work in advertising.

Transferable: The party you are granting rights to can transfer their rights to someone else. Pretty much like sublicenseable except that 'transfer' indicates they lose their rights if they grant them to someone else. This can cover the party being bought by a third party.

"TOS": Terms of Service, which if you read closely, almost always fulfill the requirements for a contract. You might also see the phrase: Terms of Agreement. Basically, these are the rules and specifics of what you have to do to use a service.

'As-is', or 'as available': This is another cover-the-butt statement. This means, there could be errors in the coding, and maybe something will go wrong from time to time, and they don't want to be responsible for lost emails or broken links or accidental deletions. This is usually presented in a phrase like: "this service is provided as-is."

Reasonable grounds: A cause or reason for something that isn't unusual or unjustified. Used in a phrase like "... is reasonable grounds for breach of contract."

Jurisdiction: The range, physical or legal, over which the contract extends.

Liability: Responsibility. Usually a service or publication wants to refuse liability. If you as an artist plagiarize something and they publish it, they are liable - responsible - for any lawsuits or grievances that may be filed. So they usually have some wording about "... not liable for any unlawful activity by the Artist in regards to..."

Indemnity: A legal exemption from liability. Basically, "we're not responsible!" This is also a term for compensation for or security against damages.

Warranty: A promise of money or goods in return if the service or goods aren't as promised. Usually you'll find a phrase like: "There is no warranty associated with this service, implied or otherwise."

Expressly/Implied: Expressly is something that is written out, implied is something that is considered reasonable that everyone should know without it being written out. For example, it is implied that when you submit your work to Elfwood, you understand that it will be available to the entire Internet, even if it isn't expressly written that way.

Right of Survivorship: When you die, the contract is passed on to your beneficiaries. Often a contract will state: no right of survivorship.

Statute of Limitation: A contract may set out a reasonable time limit for a grievance or breach of contract to be brought forward, called a statute of limitation. Some contracts may even specify, "...regardless of any statute or law to the contrary" (Yahoo!'s TOS does).

Writing Your Own Contract

You don't have to use all, or even most, of the above terms when you are writing your own contract. Stick to language you understand, write everything as clearly as possible, and think about a whole lot of possibilities as you go along. There are a few things you will absolutely want to make sure you have.

What are you agreeing to? If it's a commission, make sure you write down what size, what media (or specify that it's your choice, if that's the case), what rights you might be including (usually none, or just permission to display them on a webpage), whether or not the customer gets the original, or a print. Write down how much money you will get, and what kind of refund you might give if they aren't happy.

When do the parts of the agreement have to take place? When do they pay you? Do you agree to have the commission finished by a certain time? If you don't get paid by a certain time, are you allowed to change your prices?

Make sure it is a contract! Does it have the four parts? It is assumed you are the artist, and therefore able to agree to the commission (agency). Is your transaction legal? Specify that you aren't dealing with someone under 13, and that they aren't asking you to steal someone else's intellectual material. State that "I have read and understand these terms" to verify that due consideration has occurred. And most importantly, make sure you get the statement "I agree," or "Yes, this is all fine!"

The Element of Trust

You don't have to print this out and get them to sign your contract if you don't want to; it all depends on how much you trust your client. A verbal agreement is all very well and good, if you don't think you'll ever be called in to court and have to prove it. An email is much better documentation, but even those can be altered and forged with some effort. A signed, hard-copy document is even better proof, but again, can be forged, though with more difficulty once signatures are involved.

The golden rule of contracts is: don't enter into one if you don't trust the other party. Now, I don't trust your average email service not to be a corporate giant out for their own good, but I also trust that they have better ways to make money than to look for ways to screw their average small user.

Keep it Straight

Perhaps the most important advice I can give regarding contracts is to keep your records organized. If you use email to exchange contracts, make sure you can find the appropriate email(s) again. It is best to have a single email with all of the terms for clarity. File any hard copy contracts in a logical fashion. If you make verbal contracts, write down the terms later, and date it and make a note of how the contract occurred (phone call, conversation on the street, etc).

I end with a disclaimer: This article is based on US contract law, and I highly recommend doing some specific research into the exact language of your own country's restrictions. If you have any serious questions about a contract, you should talk with a lawyer, which I am not.