If you are a website developer, it takes time and experience to build a client base, as well as hard work and determination to grow your business. If you’re hiring employees or interacting with more clients, it is important to have the right legal documents in place to protect yourself. This article will outline the three most common contracts that you should use when running your business.
A client agreement is a legal contract that defines the relationship between your business and your clients. It is important for your business so that both you and your client have a clear understanding of the work you are performing as well as the work that is not included. This document is often attached to either a:
- quote for your services; or
- invoice for payment, as your client will need to read and accept these before you commence work.
Your agreement can set out various aspects such as:
- services that you will provide;
- client obligations;
- intellectual property ownership;
- dispute resolution;
- payment; and
Your agreement should also contain a schedule that sets out the:
- services that you will provide; and
- costs and timeframes for delivery.
Payment terms are an important aspect to draft into your agreement as they need to be clear to your client from the outset. You need to confirm your fees, as well as acceptable forms of payment such as a credit card or direct deposit. You should also set out your payment due dates, which may be due:
- according to particular project milestones;
- upfront; or
- upon completion.
Your clients need to know these terms before they agree to your services to ensure that they can meet your conditions. You should also have a clear payment recovery process if your clients have overdue invoices. In this event, you could:
- cease your services until they make payment,
- charge interest on overdue invoices;
- engage debt collection agencies; or
- report the debt to credit agencies.
Although the possibility of a dispute with your clients may seem unlikely, it is best to be prepared and try to resolve it before it escalates and costs both parties more money. In your agreement, you can clarify that disputes:
- must be notified in writing first with adequate time to respond; and
- should progress to alternative dispute resolution (ADR) if the initial response is inadequate or does not resolve the dispute.
Methods of ADR are preferable in many circumstances to avoid the high costs of litigation. ADR can include:
- mediation; or
In both options, an independent mediator or conciliator can assist you to reach an amicable and satisfactory solution. Well-drafted dispute resolution clauses limit the time it takes to resolve the dispute because the clause limits any disagreement over the method to resolve it.
Developing a website for a client means creating a large amount of intellectual property. Therefore, your client agreement should also define what intellectual property you own and what intellectual property the client owns. Generally, you will find that any intellectual property that you develop or create when developing a website will remain yours. Your intellectual property clause should also include references to your wider team of contractors or employees to ensure that you can enforce the clause regardless of who developed the intellectual property. This clause should also remain in force after you have completed the work or the contract is terminated.
Termination of an Agreement
Your termination clause should outline a clear set of steps or guidelines for either party to terminate the client agreement. This is especially important as you can set out the method for either party to notify termination and the timeframes involved. You should also include:
- the payment terms upon termination, depending on how much of the project you have not yet delivered; and
- whether your client has breached any material terms of the agreement.
Ensuring you have clear termination clauses drafted within your client agreement will save you time, energy and stress down the track because the process will be set out between yourself and your client.
As a small business, you may have a heavy workload but you may not be ready to hire employees just yet. Alternatively, you may require the specific services of:
- graphic designers;
- marketing specialists; or
- additional programmers to help you meet the project deliverables and timeframes.
All of these relationships between a sole trader or company and your own business may be simple contractor engagements (or commonly referred to as ‘subcontractor’ engagements). Sometimes this type of simple arrangement means you may be less inclined to draft a formal agreement. However, a structured contractor agreement is important to set out the legal obligations that each party owes to the other. You can prepare a master version of a contractor agreement that will allow you to edit the schedules and relevant project details to ensure you can use the document time and time again, with a range of contractors. You can form great working relationships with contractors but it’s best to ensure that you define the relationship in a document rather than a handshake, for the safety of both parties.
What You Should Include
A well-drafted contractor agreement should include some key details including;
- engagement of the parties;
- fees and invoicing;
- warranties and representations (by either party);
- intellectual property;
- term of work; and
Firstly, you and the contractor need to agree on the terms of the relationship such as:
- start and end dates; and
- the timeline for deliverables.
An engagement clause confirms these terms. Within this clause, a contractor agrees that they will perform the services as specified within the timeframe. The clause should also provide for the extension of the agreement terms if you still require the contractor’s services after the end date.
Fees and Invoicing Clauses
Fees and invoicing clauses are important to confirm the method and timing of your payments to your engaged contractor. Generally, you will agree to the fees before starting. However, you may agree on an hourly, daily or project-based rate, depending on the circumstances. Your contractor will usually invoice you directly with the set rates and any agreed out of pocket expenses. This invoice should include the method and terms of payments. These clauses are important because they help avoid confusion throughout the project concerning when payments are due or likely to be made.
When you engage an independent contractor, your business insurance is often not intended to cover these contractors. However, you will need to confirm this with your insurance company. If your insurance does not cover the contractors, you will need to state this in your agreement clearly. You may then require that the contractors provide you with evidence of their insurance. It is important to ensure that there is adequate insurance in place and maintained throughout your engagement with the contractor.
Similar to your client agreement, intellectual property is a vital clause when using contractors to help you develop material for clients. As a contractor does their work, they will have access to and produce a wide variety of intellectual property both, for your business and your client. In your client agreement, you will have already set out that the intellectual property that you, your employees and your agents create is your property. However, drafting a similar clause into your contractor agreement is important.
Your contractor should agree to assign to you any intellectual property they create as part of the delivery of the specified service. If there is an agreement already in place that differs from this, you may want to include a clause that allows for intellectual property to be shared both ways between the parties. This may help mutual development or collaboration in the future. It’s important to consider what is best for your business and your clients when putting this together.
Your termination clause will refer to automatic termination at the end date of the agreement, known as the service term. Furthermore, your termination clause should set out:
- methods to inform either party;
- termination upon serious breach; and
- the obligations on both parties following the termination.
These obligations commonly include reference to:
- ceasing supply of service;
- delivery of any work and work in progress;
- payment of outstanding amounts; and
- return of all property which belongs to either party.
Contracts are also important for people inside your business. Taking on employees, whether casual, part-time or full-time, is a big step when operating your business. It’s not only a financial commitment but also requires different skills in managing team members and their quality of work.
There is no legal requirement to have a structured employment agreement between your business and your team members. However, it is a good idea to define this relationship. An agreement with your team members sets out your expectations during and after their employment, such as:
- duties and responsibilities;
- probationary periods;
- company provided equipment such as a laptop or mobile phone;
- intellectual property;
- restraints; and
Restraint of Trade
You also need to protect your client base, especially from employees attempting to poach them after they’ve worked with you. Although you will have put protection clauses in your client agreement, you should also include non-solicitation clauses in your employment agreements. These clauses seek to limit your employees from directly soliciting or taking your clients away from your business to their new business, usually for a set amount of time, such as 12 months from their termination. To protect your business further, you may also wish to incorporate restraint of trade clauses or non-compete clauses. These clauses attempt to limit your team members from competing with your business, whether by:
- working with a competitor; or
- being engaged by a business that is the same or similar to your business.
You can set out restraint:
- time periods, such as three or six months; or
- areas, such as 50km or 100km.
However, the restraints need to be reasonable and the employee can challenge them in court.
A structured set of legal documents is crucial when bringing in clients and growing your business. These include:
- client agreements;
- contractor agreements; and
- employee agreements.
These agreements will help you set out your expectations and protect your business in many ways, including your intellectual property or if a dispute arises. If you need help drafting these documents or have any questions, you can contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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