Everything You Need to Know About Third Party Payor Addendums
If you are in the wedding and event industry you have probably had a couple tell you that a family member wants to help pay your fees... and then that member member mentions THEY will be the ones signing the client contract.
However, third parties—such as parents—should NOT be signing the client contract even if they are contributing financially. Instead, they need to sign a 'Third-Party Payer Addendum'.
When someone else pays for a portion of your services, they become what’s called a “third party payor”, meaning that they are paying on behalf of your clients but are not an actual client that you are servicing under the actual service contract. As a small business owner, it is perfectly fine and legal to accept payments from third-party payors AS LONG AS they have signed a third-party payor addendum.
Let's start with the basics.
What Is a Third Party Payor Addendum?
A third-party payor addendum is essentially a one-page document signed by the clients AND the third-party (aka anyone paying who is not a client) and puts legal conditions on the third-party's payment and involvement with the clients' original agreement.
A third-party payor addendum does not change the original client contract but instead acts as any other 'addendum' would by ADDING another ‘page’ to the contract to include information about this new third-party payor and how the payment will be treated. Going back to our example above, if a parent of the couple pays for your services, they will need to sign a third-party payor addendum stating they agree to pay the fees but they understand they are not considered a new client added to the original contract unless stated otherwise.
It is important to note that the third-party payor addendum is a SEPARATE document from the client’s original contract and should be treated as such. The addendum can make references to the original contract and can include some information from it, but the original contract should not be sent to the third party. Only the clients will see both the original contract and the Third Party Payor Addendum. Thus, they are two separate documents. The confidentiality of the original contract should stay with the clients and should not be given to the third party.
Additionally, you should let your clients and third-party know that all decisions regarding the event will still be in the sole hands of the clients. Signing this third-party addendum does not change anything regarding the event or who makes decisions regarding the event.
Now, how do you actually send this document to the third party, legally? You have a couple of options.
How Do You LEGALLY Send These Documents?
After constructing your Third Party Payor Addendum, there are a few ways you can have it legally signed. You can send it via a secure and private electronic system, such as HoneyBook, Dubsado, an Encrypted Document from Adobe or anything else that provides access only to your clients.
If you are choosing the electronic route, make sure that the addendum has a clause specifying that an electronic signature is legally binding similar to a hard-copy contract.
If your CRM system allows, send the original contract to the clients to sign and, once that agreement is signed by both you and the clients, then send the third-party payor addendum to the clients and the third-party payor to sign (remember, the third-party only gets the addendum document!).
If your CRM system does not allow multiple contracts under one project, you will have to find an alternative route to having the third-party sign the addendum because you want to avoid them seeing the original contract for services for confidentiality purposes. The Third-Party Payor Addendum should have a copy of your payment provisions listed in it so the third-party knows exactly what they are agreeing to payment-wise.
Your other option is either an encrypted pdf document that can be sent online or a traditional hard-copy contract. If you go this route, you need to have multiple copies of the addendum (one for yourself, your client(s), and one for the third-party payor).
If you opt for the traditional paper version route, it is HIGHLY recommended that you scan this document into a software to have a digital and physical copy once all signatures are acquired.
Whatever option you choose, it is important to keep everything consistent which means if the original contract is electronic then the addendum should be as well. This avoids any speculation as to why there are different documents if brought to legal counsel.
It is crucial you have separate contracts for your clients and for any third-party payors like parents, friends, or other family members. Your clients are the ONLY ones who should be signing your event service contract. Others who are just financial contributors should sign a third-party payor addendum.
Now that you are an expert on how to deal with third-party payor addendums make sure you have the addendum template at your fingertips.