Bartek
A contract is a formal statement between you and your client. It is a public admission of your relationship to each other to achieve a certain goal, and it outlines--or should outline--the part played by each of you in the effort to achieve that goal or those goals.
I don't know where you are located, but I recommend to my clients in the US that their contracts two statements in their contracts:
- that both parties agree that any issues arising from the contract--specifically but not solely regarding non-compliance--will be handled by an arbitrator or a mediator rather than through the courts, and
- that the contract is governed by the laws of the state where you (i.e., my client, the service provider and person who presents the contract) resides.
This means you have outlined the path to take if a relationship goes south without announcing that you expect it to. It doesn't mean that a client won't sue you in a court of law, but it means that this will be likely only if absolutely every other means of negotiation has failed. Ditto you: if you have a problem with a client you must first seek mediation rather than small claims or other court action.
Now, on to what I see as your
real question: If you have a contract does this mean you can be confident that you won't ever be sued or that, if you are sued you won't have to pay up?
Alas, no. Believe it or not, your clients are human beings with their own sets of wants, needs and perceptions (about both the work you undertake for them and a myriad of other things). While a contract and other risk management strategies may cover most problems, no one can reasonably guarantee the behavior or another. If a client is determined to sue you he or she will sue you no matter how clear your contract may be.
This is where your common sense about a potential client has to kick in. Pay attention in the early days of your relationship. If you are concerned that this person isn't hearing what you're saying, or s/he isn't treating you with appropriate respect or seems to be "itching for a fight," consider whether the risk of trouble is worth the assignment.
In the US, some general liability and all professional liability or E&O insurance policies will cover the costs of a lawyer to defend you against client lawsuits. Similar insurance policies exist elsewhere. So the question becomes: Given a strong contract, how much further risk are you willing to accept? Do you need to protect yourself with insurance, too and if so, for how much? (That's a different question: As a detailed discussion begins to tread on information and advice for which I am generally paid, I'll leave it to others to answer.)