If you run a business, the chances are that you will need a client agreement.  Of course, it can be difficult to know what to include in it. This article discusses those key terms that all businesses should include in their client agreements.

What is a Client Agreement?

A client agreement is a contract that you make with a customer. In it, you explain the terms and conditions under which you will provide your service to them. Previously, client agreements commonly took the form of a service agreement signed by both parties. These days it is more usual to provide a set of terms of conditions to a prospective client over email. If they subsequently choose to use your services, the law considers that they have accepted them.

What are the Key Terms of a Client Agreement?

To a certain extent, the contents of any client agreement will depend on the business. The agreement for a marketing agency will not be the same as that of an architecture firm simply because the nature of their businesses is different. Nonetheless, there are some essential terms that every client agreement should contain because they are an issue for every business.  These clauses include:

  • A description of services;
  • Payment/Terms of Payment;
  • Dispute Resolution/Mediation;
  • Limitations on Liability; and
  • Termination

1. Description of Services

This term is essential in every client agreement. It is important because it sets out the parameters of the working relationship. A business needs to be extremely clear about those services that it will provide to a client and all those things it will not do. These clauses are most useful when they are drafted using clear and accessible language.

A clear and definite description of services allows the client to know what they can legitimately expect from your business.  It can also help to avoid problems later on. Many legal disputes concerning client agreements concern the scope of the services. It is in every business’ interest to prevent this kind of difficulty arising.

2. Payment and Terms of Payment

As every business has its financial obligations to meet, the clause concerning payment for services is crucial.  It must be clear and tell the client:

  • How much the business will charge;
  • When the customer must pay;
  • Outline any stipulations concerning acceptable methods of payment.

How a business expresses the total charged will, of course, depend on context. Some service providers might want to specify rates per hour for different tasks as well as give the total they will charge for the job. If a business provides a quote via email and attaches their agreement to the email, they can also refer to that price.

All contracts should specify terms of payment. For example, that you require payment within fourteen days.  Of course, a business can ask for payment upfront. Nonetheless, it is a good idea also to include express terms of payment.

If a business has any stipulations about methods of payment, the agreement needs to communicate this. For example, if your business does not accept personal cheques, the client agreement needs to clearly stipulate this.

3. Dispute Resolution and Mediation

Unfortunately, conflicts arise in the course of business.  These are costly for all businesses. In such cases, a client agreement should require the parties to attempt mediation before the dispute escalates to court. Mediation is not only more cost-effective, but it can also enable the parties to preserve more goodwill for the other than through legal action. This should form a dispute resolution clause.

4. Limitations on Liability

All service providers will want to limit their liability as much as is possible under the applicable law. Conversely, all clients will want the business to accept as much liability as possible.

A client agreement must clearly, explicitly define a business’ limitations on liability.  It should also specify that the agreement itself is non-negotiable.

5. Termination  

A client agreement should specify how either party can end the agreement.  It is a good idea to request full payment on termination, although this will depend on the type of services that the business contracted to provide. A business could also require payment for all services rendered up until termination.

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If you are starting up a business and need assistance reviewing or drafting a contract, LegalVision has helped many businesses with tailored online legal advice. It would be our pleasure to assist you. Call LegalVision today on 1300 544 755 or fill out the form on this page.

Carole Hemingway

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