Reading time: 4 minutes

Many companies need the assistance of external businesses, whether that be an accountant or a public relations specialist. Often a client agreement establishes this business relationship. A client agreement is a contractual arrangement between two businesses, allowing one party (the service provider) to provide services to another party (the client). This article will run through your typical obligations under a client agreement. It will also explain the terms and conditions a client should consider when reviewing or receiving a client agreement from a service provider.

The Services You Receive

A client agreement should clearly set out the type of services you will be receiving. This is the ‘scope of work’. A well-defined scope of work will give you certainty about what you will be receiving and hold the service provider to account if they fail to comply with that scope.

Although you are the party receiving services, you may still need to take actions to ensure the service provider can do their job. For example, the client agreement may state that you have to ensure that the service provider has:

  • the necessary access to your premises; and
  • all the information they require.

If you fail to fulfil these obligations under a client agreement, the service provider may not have to provide their services. Depending on what your client agreement says, you may also be required to compensate the service provider for expenses incurred.

Payment for Services

As the client, one of your main obligations under a client agreement is to pay the service provider. The client agreement should clearly set out the amount payable and the payment terms. These terms include whether a deposit is payable and whether you will be required to pay in advance. You should be aware of any payment terms regarding interest or the ability of the service provider to withhold their services if you don’t pay on time. Ideally, all payment terms should be stipulated in the agreement. For example, the service provider’s invoice should not contain any extra terms.

Intellectual Property Obligations Under a Client Agreement

Intellectual property (IP) is important for clients receiving services from IT professionals and media agencies or consultants, among others. You may have obligations to ensure that you protect the service provider’s IP and confidential information. For example, you may need to sign a non-disclosure agreement or agree to not on-sell any products to third parties. However, you should also ensure that you will have the ability to use any IP provided so that you can use the services you paid for.

You will also want to ensure that the service provider provides an IP warranty. This means they promise that their provision of services, and your use of the IP, will not infringe any third party IP rights.

Restrictions on Your Actions

Some client agreements may impose certain restrictions on you as a client. These restrictions could state that you cannot:

  • engage other service providers that provide the same services, or services which are similar (if the agreement is exclusive);
  • poach the service’s provider’s employees, contractors or agents; or
  • engage in business that may cause a conflict of interest.

By understanding and complying with any restrictions, you reduce the risk to your company.

Obligations Relating to Sub-Standard or Defective Services

Unfortunately, there is always the chance that the services you receive are not up to scratch. Alternatively, the services may not have obtained the results you were looking to achieve.

The client agreement plays an important role in addressing these problems. It should set out what the service provider will do to rectify any sub-standard or defective services. It should also address how you should communicate any dissatisfaction with the services.

For example, you may have a specific time frame to make a complaint about the services. If this time frame lapses, the service provider may not have a contractual obligation to rectify those services.  It is also important to note that, in addition to your contractual rights, you may have rights to a refund under the Australian Consumer Law if the quality of the services was unsatisfactory.

Key Takeaways

Clients have various obligations under a client agreement and these obligations go beyond the standard requirement to pay for the services. For example, you may need to grant the service provider access to premises or agree to protect their confidential information.

If you are about to enter into a client agreement or have concerns about a client agreement you have entered into, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.


Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards