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A client agreement is a formal contract between your business and your clients. A master client agreement is where you use the same agreement, changing only the client-specific details for each new client. For instance, you would update the services, fees and invoicing provisions in each agreement with a new client.
It is important to address several issues in your client agreement, including:
- what services are being provided;
- what fees you will be charging;
- when you expect payment for your services;
- the responsibilities and obligations of both parties;
- the length of the agreement;
- how you or your client can terminate the agreement;
- what intellectual property is being transferred, if any;
- the process for resolving a dispute; and
- what your business is liable and not liable for.
This article focuses on the services, fees, and invoicing clause. It will explore not only what specific details you should cover but also why these elements play a crucial role in fostering a transparent and mutually beneficial relationship between your business and its clients.
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Services
In drafting the agreement, your contract lawyer should clearly outline which services your business provides in the ‘services’ section of your contract. Equally as important, you want to state what services the agreement excludes.
Service clauses within an agreement should also allow for variations in the services. You might agree that variations can be made, provided that both parties agree in writing, including the price for the additional services. The agreement should also have a clause that allows you to amend the services or price with reasonable notice (e.g. 30 days), but that allows your customer to terminate the agreement with notice if they do not agree to the proposed changes.
Within a client agreement, there is the option to incorporate a Form of Order or Statement of Work. This is especially relevant in cases where an ongoing relationship exists, but projects may differ. A Form of Order or Statement of Work outlines the distinctive particulars of a specific project. Notably, even when you set out any project-specific details, the overarching terms of the main agreement continue to bind the involved parties. This allows for a flexible and tailored approach to individual projects within the broader framework of the established client agreement.
Fees and Invoicing
Your clients need to know how much they are paying for your services. Some businesses charge fixed fees and require payment or a deposit upfront. Requesting payment upfront is often a good way to ensure payment and saves you from chasing invoices later.
On the other hand, some businesses charge hourly rates and bill their clients at regular intervals. If you invoice your clients regularly, your client agreement should set out the payment terms. For instance, how many days will you give your clients to pay each notice before it turns into a late payment?
To protect your business, you can also insert terms that allow you to do any of the following if a client does not comply with the payment terms:
- terminate or suspend all services immediately if, for example, payment is not made within 5 business days from the invoice due date;
- charge reasonable interest on the unpaid amounts (for example, the Reserve Bank of Australia cash rate + 2% p.a.); and
- engage debt collection services.
The termination clause should clarify that when the agreement terminates for whatever reason, you are entitled to recover payment for your services provided, even if you have yet to invoice for those services.
In the event of a dispute arising around invoicing, including a dispute resolution clause becomes crucial in establishing a clear process for resolution. Typically, this clause sets out the initial steps whereby both parties engage in discussions to resolve the issue. Following one or two attempts, the dispute may escalate to arbitration or mediation. While legal proceedings in a court remain an option, a well-written dispute clause aims to guide the parties through a series of steps before parties resort to legal proceedings.
Continue reading this article below the formKey Takeaways
Client agreements are important legal documents. They create a legally binding relationship between your business and your clients. Importantly, your client agreement must be clear on the services you provide and how your clients will pay your business. The scope of services and payments are generally the most common disputes between a business and a client. Having a well-drafted services, fees and invoicing clause could prevent a dispute down the track.
If you require assistance preparing a master client agreement, 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.
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