Question about painting a casual acquaintance.

[Mary Reilly]

Recently while painting in my studio, I looked out the window and the barber across the street was standing outside his shop on a break. His outfit, his stance, the lighting, etc, everything had the making of a portrait. I grabbed my camera and ran across the street and started taking pictures. He, of course, was gracious and continued posing for me. He is very excited that I am going to paint him, and even said that when it is done he wants to buy the painting.

If the portrait turns out as I envision it I want to use it for competition and also as a sample for about a year. My dilemma is that even though he said that I have permission to paint him (and in fact he is excited that I want to) and he said I can use the portrait for competition and as a sample, I'm unsure how to proceed from here since all the portraits I've done up until now have either been commissioned paintings or family. Should I pay him a model's fee and if so, how much should that be? Also, should I have him sign a release form? He hasn't asked for any money and although I prefer to not pay him, I want to do what is right. How have other's handled using a casual acquaintance in a portrait?
Thanks for any advice.
Mary Reilly