Client Agreements
Are you tempted to seal a business agreement over a good old-fashioned handshake? Well, let me introduce you to the Chung family, owners of Custom Cleaners Dry Cleaning in Washington, DC. Once upon a time (2005), the Chung family lost a single pair of pants and were subsequently sued....for $67 million (yes, you read that correctly).
While this probably won’t happen to your business, disagreements are bound to happen occasionally. As a result, having client agreements in place is one of the most important things you can do to protect your business and yourself.
Many business owners get overwhelmed because they think of client agreements as complex documents filled with legalese and arbitrary clauses, when simple agreements can more than suffice. In this article we are going to give you the key ingredients to create an effective client agreement and direct you to free templates for you to use.
Disclaimer: The information presented in this article does not constitute legal advice. Your client agreement should be completed with the assistance of an attorney or an SBDC advisor.
Who should use client agreements?
A client agreement is simply a signed agreement between a client and your business that outlines the scope and terms of your obligations to the client and vice versa.
To ensure that both parties understand the work being done, the timeline, and terms of payment, a client agreement should be used by any business that offers direct to consumer, outcome-based services. Some examples of these businesses include:
Consultants
Web design/development
Caterers
Marketers
Home/office cleaners
Writers
Photographers
Landscapers
What should be included in the agreement?
Now that you understand what a client agreement is and why it’s important, what should you include in the document? While the specific language may vary depending on your industry, here are some things that you should consider when creating your client agreement.
Get it in writing.
This may be the single most important aspect of a client agreement. While oral agreements can be legally binding, they are incredibly difficult to enforce. For this reason, your client agreement should be written and include each party’s rights, duties, and expectations.
Keep it simple.
While a client agreement is a legal document, that doesn’t mean that you should need an interpreter just to read it. Even if you opt to enlist the help of a lawyer to create an agreement the document should be written in terms that are easy to understand for you and your client.
Identify the parties.
It is vital to include the correct, legal, names of each party to an agreement (this is usually established in the beginning of the agreement). This means that if you operate as an LLC you should list the name of your LLC, not your personal name (Example: Your Company, LLC).
Establish the scope of your obligations.
You should explicitly spell out what you will and (maybe more importantly) will not be doing for your client. This section should be as detailed as possible to remove any room for miscommunication. As you write this portion of the document you should consider the where, when, and how of your services. The more detailed the better.
Compensation.
In this section you will need to outline who is doing the paying, how much they are paying, when the payment is required, late fees/early payment discounts, whether the payments are refundable, and any other payment conditions that apply to your business.
Termination.
You will want to have a detailed section that defines what is required in order to void the contract without legal repercussions. For example, if one party continues to miss milestones.
Resolving Legal Disputes.
You should consider including details on how any legal disputes will be resolved between you and your client. This may include choosing the governing law (what state’s laws apply to the contract) and arbitration (as opposed to suing in court).
Intellectual Property.
Agreements are incredibly common in creative industries (graphic or web design, marketing, development, etc.), where original work will be created for a client. If your business operates in one of these fields, you will need to clarify who owns the original content, when/if ownership of content transfers (typically after payment), whether the client can change the provided creative, and how changes/edits can be made.
Pro Tips:
Free Legal Form Templates
If you Google legal forms, you’ll find a lot of sites that provide forms for a fee. The Library of Virginia offers free access to Gale Legal Forms, a service that offers hundreds of industry-specific contract templates.
Paid Legal Form Templates
the Legal Paige is a legal education platform and contract template shop for small business owners. The Greater Roanoke & NRV SBDC is an affiliate with the Legal Paige. Should you choose to click the link and purchase from the Legal Paige the Greater Roanoke & NRV SBDC may receive a referral fee at no cost to you.