I'd like to add something to this. In the event a client necessitates a signed contract, here is an example one I use when dealing with bands:
Throwing out the obfuscating legalese, this document expresses the terms agreed upon between xxxxxx xxxxxxx (client) and xxxxxx xxxxxx (web guy). These terms include the following:
One (1) Flash application, including audio, video, and image components to be provided by the client.
One (1) php forum for the fans. Preferably a free one, unless the client would prefer to pay the licensing costs for vBulletin or such.
One (1) mailing list to keep signees informed on events.
One (1) online storefront to manage sales of merch.
Maintenance of www.xxxxxxxxxx.com.
The project shall be delivered upon _______ ___, ____.
If for any reason these terms cannot be kept by either party, the client has the right to a partial refund to be decided by the web guy provided there are no punches thrown, mexican standoffs, etc, and provided the web guy has the funds to relinquish. The web guy will delete all files no longer under his authorization for use, and will not use any original artwork used for www.xxxxxxxxxx.com in future projects except with permission from the client.
With the client's permission, the web guy would like to be able to use www.xxxxxxxxxxx.com for future portfolio use upon completion of the project. Most people allow use, because it's pretty much a win-win situation for everyone, but should the client wish to deny permission, www.xxxxxxxxx.com will not be used for portfolio purposes. If the client gives the web guy permission, please sign below.
________________________
If these terms are agreed upon, the signatures of both parties should be placed below on the following lines. If these terms are not agreeable, then the web guy will be sad, and draft a new document should the client request, or the client can draft one at her behest.
Informal and humorous can win confidence, especially in creative types. Even clients who have decided against my services due to price or time enjoy a more "human" entity to interact with, and have referred me to others who needed my services. I will admit this method doesn't work for all clients though, it's best to determine if the client would appreciate an informal contract before trying this :)