Hi Lisa Sigman here to do what attorneys like to call a contract tear down. The contract that you see in front of you is a mocked up version of a coaching agreement that a life coach lent for free to her friend who is becoming a business coach. I’ve removed all the sections that are not relevant to the points that I’m making today because I just wanted to focus on the problematic stuff. I want you to see the kind of problems that you can get into when you get a contract from someone else, or you find it online for free, or you grab clauses that sound great and piece it together on your own because what you end up with is a word salad that will not protect you and may not be enforceable.
Overview of the Coaching Agreement
So in this scenario, “Lemmy Lendit” is the coach that lent this agreement to her friend. Lemmy is a life coach; the friend that she gave it to is a business coach. On first blush, it looks like it has all of the sections that it needs. It explains the services in section one, it explains the term of the agreement and termination in section two. Section three covers fees and payments. Section four covers confidentiality. Section five is the miscellaneous section that covers all the legalese that no one ever reads and then came the signatures.
Breaking Down Each Section – Services & Scheduling
In section one, the scope of service is great in it – blah blah blah -it explains the services, the deliverables (the things that the client would be getting in exchange for their payment of the fee). It also includes a scheduling section, which I omitted, and then also canceling and rescheduling. So in the event that a client must cancel or reschedule their coaching session at 24-hour notice is required, very reasonable. Otherwise, the client will be responsible for payment of the session again, very reasonable.
Breaking Down Each Section – Term & Termination
Section 2 covers the term and termination. The term, standard legalese, the contract starts on the effective date. The effective date was defined, and then it continues until, and that was also defined. It either ends after a set number of sessions, ends after a set number of months, or it ends once the scope of services are fully delivered. Any of those options are fine; it just has to be clear. They also talked about ways that they could extend it, add on additional time, or renew the agreement.
Termination of services says that the client may discontinue coaching at any time upon written notice. Okay, all coaching packages are non-refundable, and that the client’s obligation to pay the entirety of the agreed-upon package price shall remain despite discontinuation of the services. Again, very reasonable.
Breaking Down Each Section – Fees, Payment & Refunds
Section 3 addressed fees and payment. The fee and payment section again, some blah blah blah because there was really nothing wrong in there. It explains the payments, how much they were, when they were due, the methods in which the coach accepts payment.
Then it talks about refunds. The client may receive a full refund if services are canceled before they begin, or a partial refund if sessions are missed with proper notice of at least 48 hours.
Okay, so here is one of our first inconsistencies. Earlier, it said that the coaching packages are non-refundable. Now we’ve carved out a point in which that is not true, and this is actually okay. They can get a full refund of services if they’re canceled before they begin. That doesn’t undermine that previous statement of it being non-refundable. It basically gives them a little window of buyer’s remorse, and they can change their mind, right? That’s okay.
The problem is the partial refund for missed sessions with proper notice. Number one, it’s saying notice is 48 hours, but up here, it said notice is 24 hours. So which is it?
Also, if somebody’s really clever when they read this, they can’t cancel and get a refund once services have begun, but if they give 48 hours’ notice, they get a refund for that session. So what if they call 48 hours before their second session and then they say, ‘I want to cancel every session after this’? Well, they have to get a partial refund because they’ve given more than 48 no 48 hours’ notice for all of their sessions. Completely undermines the non-refundability statement for this section.
Breaking Down Each Section – Confidentiality
This is great, and it’s very important. Coaches share with their clients intellectual property that should be protected and maintained as confidential. Clients share with their coaches information personal to themselves, or trade secrets related to their business. That’s information that should be kept secret.
The problem with this clause is only the client is protected here. There’s nothing talking about the coach’s intellectual property and confidential information being kept secret. This should cover both parties. This is a problem.
Breaking Down Each Section – Disclaimers
Section 5 is where the miscellaneous legalese lives. For the most part, the things that were included were okay, but there were a couple of issues. The first is the disclaimers. The coach who owns this agreement, who is sharing it with someone else, was a life coach. So, the disclaimers here are talking about how her coaching is not a replacement for medical or psychological treatment or diagnosis. Clients that are suffering from physical or mental issues and ailments and problems should be consulting with the appropriate professionals. That’s a very good disclaimer to have, but if you’re a business coach, it’s not really relevant or applicable.
But disclaimers for a business coach should be included that address things that could be misconstrued as legal advice, financial advice, a guarantee of increased revenue or clients. You want to disclaim those things because you’re not promising those things, and you are not providing those things.
Breaking Down Each Section – Indemnification & Limited Liability
The next section is an indemnification clause. Typically, indemnification is addressing making someone whole because of something that came out of this agreement as it relates to a third party. Indemnification itself means to make another party whole for a financial loss. So, if I get sued, and you’ve agreed to identify me if I get sued, it means that you will pay me whatever I’ve lost as a result of that lawsuit.
Now, most commonly, it’s because of a third party. So, you have a trademark, you’re letting me use it. A third party comes along and sues me, saying that that trademark violates their trademark. They win or lose, I’ve lost money in this lawsuit. You will indemnify me, and I’m made whole.
When there isn’t a third party issue, you often don’t need indemnification, but it’s still okay to keep it in if it’s written to address things like intentional, reckless, or negligent acts or omission.
For example, iif I purposely share someone’s confidential information, even though this agreement says I can’t do that, that’s intentional, that’s negligent. So, I’m agreeing that if I do that, I will make you whole.
In this context, it’s still not a terrible thing to be in here, but the way it’s written is that the obligation is mutual, which is okay because you’re both sharing confidential information. So, there is potential for intentionally negligent acts on either side. But then it limits the party’s maximum liability, what they would owe under this clause, to an amount that is recovered or recoverable by the other party through insurance.
Caps on indemnification are not uncommon but the way this one’s written – whose insurance? If you have a client that’s an individual the most likely insurance they have is homeowners or renters, car insurance, maybe they have an umbrella policy – but they might not – life insurance. The umbrella policy might cover something under this agreement; the other ones definitely will not. So limiting it to insurance – what if it’s the coach that has the claim and their insurance isn’t going to cover it because it’s not what the coach did (the coach’s actions are insured) but what gave rise to this lawsuit was the clients actions or inactions. The coaches Insurance may not cover it. So whose insurance are you going to go after? This is really poorly written.
Breaking Down Each Section – Conflicting Limitation of Liability Clauses
The next section is a limitation of liability. Again it’s a great cause to have – if there are damages, if somebody does have a claim, it would be limited to whatever the limitation in this clause is. In this case, it says the coach will never be liable for damages in excess of fees paid by a client for the services under this agreement. But now that conflicts with that earlier limitation which was limited to insurance. If that’s a higher amount then the client may want that much. So these two clauses sound really great, but when you read them together they don’t make sense and they conflict with each other.
Breaking Down Each Section – Severability
So why does this matter? Well, I left in this last section because it’s actually written perfectly well but it makes clear what happens when there are conflicts. When something becomes unenforceable, the severability clause allows a judge or an arbiter to go in and say this is unenforceable so we’re going to take this section completely out. That way we can leave the rest of the contract in place to the best that we can.
The problem is, with the way this contract is written, we’re cutting a whole lot out. We would likely have to cut out the limitation of liability, and the indemnification, and the refund, and the no refund clauses because everything’s conflicting and a judge isn’t going to pick which it should be. So now you have an agreement with all these terms now that are missing because they’re unenforceable as they can’t be discerned by a third party reading it and interpreting it who wasn’t there when this deal was negotiated.
Why Investing in a Lawyer or Template is Money Well Spent
So what seemed to be a great contract that this personal uh business coach got for free from her friend who’s a life coach turns out it’s not going to do anything for her if she ever has to try to enforce it.
And that’s going to cost her money in the long run because you go into a lawsuit and the agreement is unenforceable. Now there has to be arbitrary decisions made by a judge as to who gets what. In all likelihood the client could get all their money back and you had to pay for your attorney so you’re not getting that money back and now you’re in the hole because you got a free agreement.
I hope this information was useful. Thanks for hanging in there. I just really wanted to demonstrate that free sometimes costs more than just making that initial investment.
Whether you buy a template online or you hire an attorney, that is money well spent.
Free off of Google, free from a friend who’s trying to help, it’s not always free.
