How entrepreneurs get out of bad consulting contracts and how best to avoid signing them in the first place
Online business coaching is booming. But as in any lucrative field, there are black sheep and many disappointed expectations. This is made worse by the fact that the terms “business coach” and “management consultant” are not protected and anyone can call themselves that.
If you, as an entrepreneur looking for help in achieving your business goals, expansion and higher profits, have fallen victim to a dubious or unqualified provider, you are surely wondering how to get out of the consulting contract and possibly reclaim fees already paid.
In this blog post, you will learn more about your legal options before and after concluding online (business) coaching contracts.
Online Business Coaching – Contract Type and Possible Points of Attack
Online business coaching is usually a structured communication process in which a coach supports the client in a specific area for a certain period of time in exchange for a fee.
The legal classification of an online business coaching contract is crucial for your rights if the coach performs inadequately. Basically, there are two types of contract: the service contract and the contract for work.
1.1. Online coaching service contract: no warranty claims, but damages
In most cases, online business coaching is a service contract. If the service is deficient, the obligation to pay for the coaching does not automatically lapse. However, you can set off claims for damages against the coach’s payment claim, provided that quantifiable damage has occurred.
As the victim of an online coaching rip-off or poor performance, you have various rights under the general law on breaches of contract. These include claims for damages, which you can set off against the coach’s payment claim. For this, however, you must have suffered damage.
1.2. Online coaching contract for work: clearly defined goals not achieved
The situation is different if you have defined clear, measurable goals in the coaching contract (e.g. +20% revenue/+10 new customers per week) and the coach is to be responsible for achieving them. If the coach is to be responsible for a specific result, you can demand performance and require subsequent performance (cure) if the coach has not achieved it.
It therefore generally makes a lot of sense to be very clear about the measurable goals at the start of the coaching and to record them. If the coach cannot commit to achieving the goals, you should think carefully about whether you want to get involved.
1.3 Special case: Non-performance
Regardless of whether it is a service contract or a contract for work, if the coach provides no services at all, you do not have to pay anything either. Unlike in the case of goals not being achieved, here the coach has not even carried out the contractually agreed activity. In this case, you generally do not have to pay the agreed fee and can raise the defense of non-performance of the contract.
1.4. Invalid contractual terms in online coaching contracts
Another way of taking action against dubious online coaching providers is to review the contract terms for their validity. Certain clauses in the T&Cs may be invalid if they unreasonably disadvantage the customer. This can allow you to get out of the contract or at least enforce your rights more effectively.
Examples of typical coaching clauses where you need to be careful:
- Contracts exclusively with entrepreneurs: Some coaches limit their contracting partners to entrepreneurs in order to exclude the right of withdrawal of consumers. As long as the coach clearly indicates this limitation on his website, such a clause is valid.
- Services instead of works: By opting for the law on service contracts rather than the law on contracts for work, coaches can reduce their liability. This has certain disadvantages for you as a client, as you cannot demand a specific result.
- Conclusion of the contract by telephone or in writing: A clause stating that there is no entitlement to written form is valid. Nevertheless, I recommend that you record all contract terms in writing to avoid problems of proof.
- Prepayment of the fee: A clause providing that the fee is due immediately is permissible. However, this carries a risk for you as a customer, as you pay the fee without having received adequate consideration. In the event of poor performance or non-performance, the problem of getting your money back arises.
- Some coaches prefer to sign very long-term contracts (1-3 years). Be careful not to sign contracts that are too long. Insist on monthly termination options (maximum 3 months) and/or a 4-week test period. And the longer the contract, the clearer the goals and milestones must be, to have a reliable foundation for both parties.
To determine whether certain contractual clauses are invalid, you should consult a lawyer who specializes in contract law. He or she can help you strengthen your legal position and, if necessary, take legal action against the online coaching provider.
right of withdrawal
A right of withdrawal can exist regardless of the quality of the service. Check the contract documents and the applicable legal regulations to determine whether you are entitled to such a right.
In some cases, you as a consumer may have a right of withdrawal that allows you to withdraw from the contract within a certain period without giving reasons. This may be the case in particular if the contract was concluded at a distance, e.g. via the internet, and you acted as a consumer. With business coaching, however, you will generally be acting as an entrepreneur. With other online coaching, a right of withdrawal will generally exist.
However, there are some exceptions and special features to note here. For example, the right of withdrawal may expire for services that have been fully performed within the withdrawal period. In addition, the right of withdrawal may be excluded for individually made or personalized services.
To be sure whether you have a right of withdrawal in your case and how you can exercise it, it is advisable to review the contract documents carefully and seek legal advice if necessary.
Termination without notice
If there is good cause, you can terminate without notice. This requires facts on the basis of which, taking into account all the circumstances of the individual case and weighing the interests of both parties, you cannot reasonably be expected to continue the service relationship until the end of the notice period or until the agreed end of the service relationship. The facts must be serious, and the termination must be declared within two weeks after the reason arises.
Services of a higher kind
- 627 BGB, which permits termination without notice even without good cause if the other party has to perform services of a higher kind that are typically entrusted on the basis of special trust, may apply to coaching contracts.
According to § 627 BGB, in a service relationship, notice of termination may be given at any time if the person obliged to perform the services, without being in a permanent service relationship with fixed remuneration, has to perform services of a higher kind that are typically entrusted on the basis of special trust. This can usually be assumed if the coach addresses a large number of clients and has proven qualifications in their field (further training, certificates, experience, etc., usually stated on their website).
In such cases, termination without notice under § 627 BGB (unless it has been validly excluded by contract) can be your way out. The details should be reviewed by an attorney, as court opinions differ and depend on the individual case.
Conclusion: Your legal position regarding coaching contracts
If problems arise with online business coaching contracts, it is important to know the type of contract and your rights if the coach performs inadequately or not at all. In some cases, a right of withdrawal may also apply. In some cases, termination without notice or termination for services of a higher kind may also be an option. You may also have rights of rescission and claims for damages.
Ideally, you should review the contract documents with an attorney when signing an expensive coaching contract to be able to negotiate optimal terms.
Check the contract documents and, if necessary, hire a lawyer to enforce your rights. You are welcome to contact us for a free initial consultation.
