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 or fill out the form on this page.

Joshua Elloy
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