How to Draft a Client Agreement for a Service Provider

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Table of Contents

• Define the Services You Provide
• Define Payment Options
• Consider Intellectual Property, Confidentiality and Privacy
• Specify What the Client Must Provide
• Carefully Consider Warranties
• Key Takeaways
• Frequently Asked Questions

As a service provider, you should ensure your clients sign a client services agreement. This contract sets out the terms and conditions on which you provide your services. For example, it will set out payment conditions, the type of services to be provided, and the timeframe in which you’ll provide them. This article explains some of the key obligations you have and how to write a draft client agreement to minimise your risks.

Define the Services You Provide

Your primary obligation will be to provide the services the client is paying for. Accordingly, your client agreement should adequately define those services. Typically, you can include a clear scope of work that sets out exact details and timeframes.

Define Payment Options

The client agreement should set out the amounts you will receive for the services, including whether the client will be required to pay you on an hourly rate or a fixed-fee basis.

The client agreement must specify when a payment will be due and how somebody should make payment. If the service is ongoing and long-term, consider whether you should obtain your customer’s direct debit request authority. You can directly debit the service fee from your customer’s bank account with their permission.

Consider Intellectual Property, Confidentiality and Privacy

You may need access to your client’s confidential information and intellectual property. You may also need to give the client confidential information or your intellectual property to perform your services. Therefore, the client agreement should include intellectual property and confidentiality clauses that protect both parties.

An intellectual property (IP) clause will usually set out the following: 

• who has ownership over any IP developed or created during the course of the service. IP can be owned by one party or both parties jointly; 
• the terms and conditions of any intellectual property licence, including any limitations and if a royalty or licence fee is payable;
• the responsibilities of a party if it infringes IP rights; and 
• the responsibilities of each party for defending and protecting the other party against claims of infringement or violation of IP rights.

You may also be handling personal information, which is information that identifies a person, such as their credit card details or address. If this is the case, the client agreement should address privacy obligations. For example, you will only handle the information according to the Privacy Act 1988 (Cth) provisions and your privacy policy.

Specify What the Client Must Provide

Your draft client services agreement should address whether you need anything from the client to perform the services in accordance with the client agreement. For example, consider whether you require:

• permissions;
• information;
• documentation; or
• access to premises.

If so, the client agreement should state these points clearly. You should also consider whether you need the client to refrain from doing anything, such as forwarding your work to another person. If so, the client agreement should spell this out.

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Carefully Consider Warranties

The Australian Consumer Law (ACL) implies guarantees in any client agreement worth less than $100,000. You will need to ensure that you comply with these guarantees. Most notably that you:

• provide the services with due care and skill; and
• provide services that match the ones advertised.

The ACL requires you to uphold any warranties you state in the client agreement. For example, if you state that a client may ask for a refund, you must provide a refund when requested. Therefore, you should be careful that you are capable of meeting any warranties you provide. Ideally, you should carefully draft these to ensure you do not give too much away.

Key Takeaways

A well-drafted draft client agreement is essential to protecting your interests as a service provider. You want to ensure that it clearly states:

• the services;
• payment conditions;
• intellectual property, confidentiality and privacy obligations; and
• anything you need from the client.

Furthermore, if you provide warranties, these should be carefully worded to limit your liability.

If you need help writing a draft client agreement that protects your interests as a service provider, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions