Contracts 101 for Founders
10 min read
Why Contracts Matter
A handshake deal is great until it is not. Contracts create a shared written record of expectations, responsibilities, and consequences — they prevent misunderstandings before they become disputes.
The Four Elements of a Valid Contract
- Offer — one party proposes specific terms
- Acceptance — the other party agrees without changing the terms (a counter-offer voids the original)
- Consideration — both sides exchange something of value (money, services, equity)
- Intention to create legal relations — both parties understand this is binding
Contracts Builders Encounter Early
- Client service agreements — scope, deliverables, payment, IP ownership
- Freelancer / contractor agreements — work-for-hire clauses, NDAs
- SaaS Terms of Service — the contract between you and your users
- Co-founder agreements — equity splits, vesting, roles, exit
- Investor documents — SAFEs, term sheets, shareholder agreements
Red Flags to Spot
- No IP assignment clause (who owns code written for hire?)
- Unlimited liability — always cap your liability to fees paid
- Auto-renewal clauses with short cancellation windows
- Non-competes that are broader than necessary
- Governing law in an unexpected jurisdiction
Use free templates from Clerky, Stripe Atlas, or Y Combinator's open-source documents as starting points. They are battle-tested and founder-friendly.
When to Get a Lawyer
Templates handle the routine. Get a lawyer for: raising your first round, bringing on a co-founder, enterprise contracts above £10k, employment agreements, and anything involving IP assignment from a previous employer.
Try this
Download a standard client service agreement template, read every clause, and note any terms you do not understand. Look up each unfamiliar clause — the education is worth more than the template.