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A client agreement is a legally binding contract between your business and your clients, who you are providing your services to. The clauses of a client agreement: 

  • set out the rights and obligations of both your business and your client;
  • set out the expectations of both parties; and
  • depict how any issues should be handled. 

It is important to ensure that you tailor your agreement to suit your business. This article will outline the five key clauses you should include in a client agreement. 

Scope of Services 

Your client agreement should accurately reflect the scope of services you provide to your clients. Your scope of services should set out the work you agree to do and any results you will achieve for your client outlining your entire working relationship. Additionally, having a clear description of your services allows your clients to understand what they can expect from you. 

Ensuring the services that you are (and are not) providing is clear can help to avoid problems later down the road.

Payment and Payment Terms

Your client agreement should clearly outline your payment terms for your services to meet your financial obligations and guarantee cash flow for your business operations. Your agreement should outline: 

  • how much you charge for your services; and 
  • when payment is due.

This allows your clients to be aware of such before agreeing to engage you for your services. You may:

  • charge an hourly rate and invoice your client at the end of each month;
  • provide a fixed fee for the total project and invoice your clients according to particular project milestones;
  • require full payment upfront; or  
  • take an initial deposit from your client and then invoice your client for payment upon completion of your services.

You should also consider what may happen in the event that your client does not meet your payment terms. 

For example, if your client has any overdue invoices, you may wish to cease providing your services until they make payment and charge interest on any overdue invoices. 

Limitation on Liability

A limitation of liability provision in your client agreement explicitly defines your limitations on your liability for the services you provide. Including a limitation of liability clause is an important risk management tool. You should consider your services and business’ aspects that contain risk and use a limitation of liability clause to protect yourself from such risk. 

For example, suppose you engage third parties to assist you with providing part of your services. In that case, you should acknowledge in your client agreement that your services may be contingent upon third parties and limit your liability for the actions of third parties as their actions can be outside your control.

You can limit your liability in a variety of ways including by:

  • placing a financial cap on your liability, limiting the amount of money you are liable to pay to your client; or 
  • including a time cap, limiting how long your client can make a claim after a breach of the client agreement. 

Dispute Resolution

While the possibility of a dispute with your client may seem unlikely, it is best to have a well-drafted dispute resolution clause. This ensures that you are prepared to resolve a dispute, if one arises. Your client agreement can prevent you and your client resorting to taking each other to court, which may be an expensive and time-consuming process. 

A dispute resolution clause can profoundly affect how a dispute between you and your client is resolved before it escalates.

For example, your dispute resolution clause may require you or the client to inform the other party of the issue and meet to try to resolve such issue before taking more serious action.

If the initial meeting does not resolve the issue, then your client agreement can clarify that you and your client must try alternative dispute resolution methods. These could include mediation or arbitration, before resorting to going to court.

Termination of Client Agreement

Your client agreement should include clear guidelines on how both you and your client may terminate the agreement. Without such a clause, there can be confusion over when or how the agreement may be terminated. A termination clause will typically outline that either party can terminate the agreement if the other is in breach of the agreement. You should also consider whether you or your client can terminate the agreement for convenience or any other reasons and any specific timeframes involved. Further, your termination clause should outline what should happen once it is terminated. 

For example, if your client does not pay for your services upfront, your termination clause should include any payment terms upon termination to ensure you are paid for the work you have completed.   

Key Takeaways

Your client agreement is an important legal document defining the relationship between your business and your clients so that you both have a clear understanding of the arrangement. It is crucial to ensure that your client agreement is tailored to suit your business and includes the key clauses on:

  • the scope of your services;
  • how your clients must pay you;
  • the limitation of your liability;
  • the dispute resolution process; and 
  • how the agreement may be terminated. 

If you need assistance drafting or reviewing your client agreement or have any questions, you can contact LegalVisions contract lawyers on 100 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is a client agreement?

A client agreement is a legally binding contract. It is between your business or company and your clients you provide services to. It sets out both parties rights and obligations, the expectations of both parties, and outlines how any issues should be handled. 

What clauses should be included in a client agreement?

As a service provider, the five key clauses to be included in a client agreement include the scope of services, payment terms, limitation on liability, dispute resolution and termination. 

Should my client agreement be tailored to my business?

Yes, it is important that you tailor your agreement to suit your business and its needs. You can adjust the details in each clause in order to achieve this.

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