What is a Client Agreement?
A client agreement will protect your rights, limit your liability and prevent unnecessary disputes. Learn more about client agreement here.
Conflicts can arise from time to time between you and your clients. And when they do, one of the first questions you’ll ask is “did you get it in writing?”. While it may be tempting to seal a deal with a handshake, entering into a client agreement with your potential client will give you and your business a solid legal protection should the need arise.
Whether you are operating as a sole trader or running a multinational cooperation, having a client agreement in place is essential in reducing potential uncertainty between your business and its clients. A client agreement protects you as well as your clients, fundamentally enhancing business relationships. It clearly outlines the terms and conditions under which your business will provide its services to its clients. Furthermore, it reduces ambiguities when disputes arise by clearly setting out rights and obligations of both parties involved.
It is also important to note that a client agreement can be in the form of a service agreement that sets out the terms and conditions between you as the service provider and the recipient of your services.
Things to Include in a Client Agreement
The content of a client agreement often depends on the business and should be tailored to suit the individual circumstances of your business. However, to avoid disputes down the track, there are some essential terms that all client agreements should include.
Description of services
This term is quite significant for every client agreement as it helps in setting out the parameters of the working relationship. You could clearly explain the services that your business will provide to its clients. You could also mention the limitations of the services. Therefore, by setting out the obligations of your business, this term will help minimise any problems later on as the clients will know what to expect.
The goal of including this term is to clearly set out the obligations of your clients. You could state what your business will require from its clients in order to perform the services. Also, you may explicitly identify all the penalties for not performing those services.
This is another crucial term that all client agreements must include. The term concerning payment could include details about:
- The amount that your business will charge
- When you expect the payment of your services
- Acceptable payment methods
- Any late fees that the client may incur if they don’t pay on time
All businesses want to limit their liabilities as much as possible. Clients, on the other hand, want businesses to accept as much liability as possible. Thus, to limit ambiguities regarding liabilities of the parties concerned, it is important that you include a liability term when you draft your client agreement. By including this term, you could clarify the business’ limitation on liability. Moreover, to minimise disputes in the future, you may also specify that the term on liability is not negotiable.
Even though you may not want to be in a dispute with your clients, business disputes can happen. Accordingly, it is important that you mention preferable ways of resolving disputes. For instance, you could include a clause that requires the parties to attempt mediation before taking the matter to court. Agreeing on alternatives to litigation will result in cheaper and faster resolution of disputes.
Termination for Provider and Recipient
To avoid getting caught in bad business relationships, you need to think about the conditions under which each party can terminate the agreement. Having a termination clause could protect you from claims that you are not working and save you from all the confusion regarding when a party can end the agreement.
By entering into a client agreement, you will be able to reduce the chances of a dispute arising with your client. Properly documenting your business arrangements can be complex and confusing, which is why it is best to work with a business lawyer to draft a client agreement. Conversely, you could create your own client agreement here.
Anupa is a Legal Intern at Lawpath, and is currently in her final year of studying Bachelor of Laws at Macquarie University.