Why Does My Business Need a Client Agreement?

In Short

• A client agreement defines the business relationship, reducing uncertainty and potential disputes.
• Key terms should cover services, payment terms, client responsibilities, dispute handling, termination, and liability.
• Clearly outlining expectations and legal protections can help prevent misunderstandings and safeguard your business.

Tips for Businesses
Ensure your client agreement is specific about services, payment terms, and client responsibilities to avoid disputes. Include a dispute resolution process, clear termination terms, and liability limitations to protect your business. A well-drafted agreement saves time and money by preventing misunderstandings—consider legal advice to ensure it meets your business needs.

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Table of Contents

• Services
• Payment Terms
• Client Milestones
• Dispute Handling
• Termination
• Liability
• Frequently Asked Questions

Before a client relationship is formed between a potential client and your business, your business should consider entering into a client agreement with the potential client. A client services agreement is an important legal document that defines the business relationship and reduces potential uncertainty between your business and its clients. This article outlines six essential terms a client agreement should contain.

Services

Your client agreement should describe the services you provide and how these services will be provided to the client. This ensures that both parties have a clear understanding of what is and what is not being provided. This will reduce the chance of a dispute arising in the future.

For example, if you need to hire a subcontractor to complete parts of the services offered, then this should be made clear in your client agreement. Otherwise, your client may be unaware of the subcontractor and may later argue that they did not permit you to subcontract the work. This scenario could have been avoided if you had a client agreement which sets out your business arrangements.

Payment Terms

A client agreement should set out your business payment terms, including:

• your service fees;
• when payment is due; and
• the accepted payment methods.

Failing to provide clear payment terms to your clients may result in disagreements, particularly if the payment is late or if the client fails to pay for your services. For example, if your business only accepts payment via BPAY and direct deposit, this should be included in the client agreement. If you do not include these terms, how will your client know that cash is an unacceptable form of payment?

Client Milestones

Your client agreement should set out what your client must do before you can provide the service. For example, your client may need to provide you with specific information before you can complete the job. Therefore, it is important that your client agreement contains what information your client will provide and when it will be provided. Defined milestones sets expectations between the parties and provides a working framework for your business relationship.

Dispute Handling

No business wants to be in dispute with a client about their service offering. However, business disputes can happen. A client agreement should outline how you will handle disputes. Ideally, this should be a method such as mediation that allows you to resolve the dispute without escalation. This may lead to faster and cheaper resolutions.

Termination

The client agreement should state how each party can terminate the agreement. Otherwise, there may be confusion over when you can terminate, leading to claims that you did not do the work. A clear termination clause allows you to get out of a bad business relationship.

Liability

Before offering any services to your clients, it is important to ensure you protect your business by limiting your business’ potential liability within the scope of the law. Without a client agreement, it is hard to define what your business will be liable for and the limits of business’ potential liability.

Key Takeaways

Your client services agreement should reflect your business. Without properly documenting your business arrangement, any disagreements between your business and your clients over the terms of the arrangement in the future may cost your business more time and money to resolve.

By providing certain terms for your services, you will be able to reduce the chances of a dispute arising with your clients. If you need assistance with drafting a client services agreement, call LegalVision’s contract lawyers on 1300 544 755 out the form on this page.

Frequently Asked Questions

Why do I need a client services agreement before starting a business relationship with a client?
A client services agreement establishes clear expectations, responsibilities, and legal obligations before work begins. It helps avoid misunderstandings and disputes by clearly defining what each party will deliver and how they will interact.

What should a client services agreement include regarding services?
It should describe in detail the services you provide and how they will be performed. If you plan to use subcontractors, the agreement should also clarify that you may outsource part of the work, so clients understand and consent to this arrangement.