Key Contract Terms: What to Include and What to Watch Out For
Whether you are working on writing a new contract, signing a client agreement, or simply tuning up your existing contracts, there are important terms you should consider and things to watch out for. We know that contracts can be confusing! So, we want to use this post to break down the meaning of different contract terms and what things you should pay attention to.
Scope of Services
Every contract you enter into should detail exactly what services you will be providing to clients and how that work will be performed through a scope of services section. Oftentimes, the scope of services is detailed in a document attached to the contract. Providing a scope in your contract allows clients to know what they should expect when they enter into a contract with you, as well as a reference for the services agreed upon. This will not only make sure you’re on the same page, but will help solve any conflicts between you and the client that may arise involving what services you are supposed to be providing to them.
Payment Terms and Additional Fees
To prevent financial disputes, you should have a payment terms section that details how much your services cost, how you will be paid, and any additional fees that have to be paid in case the client does not comply. Even if you think you have a good relationship with your clients, it’s always a good idea to have provisions in place to protect yourself in order to get paid on time, like late fees or a suspension of services. This provides you extra security to protect your time and resources. You may also want to think about any additional costs, like meals or transportation, that you might incur when providing services to your clients, and whether you want to include these when billing your client or whether they will be invoiced separately.
Modification and Scope Creep
Having a section in your contract regarding modification is key. This section basically tells the client your official process for adding or changing the services you will be providing and when additional costs may apply. This section will also prevent the client from engaging in “scope creep”, where you have agreed to do a specific scope of work, but the client keeps adding just a bit more. Contracts commonly require modifications to be made in writing and signed by both of the parties. This way, both parties come to a mutual agreement about any change in the scope of services and hopefully avoid scope creep.
Intellectual property is the ownership rights to the work products developed under a contract, and can include designs, templates, processes, etc. created by your business as a work product for the client. Provisions relating to intellectual property are often a major component of any contract. Intellectual property issues can arise in instances where you want to use the deliverables you provided to one client to another new client. If you don’t include language in your contract about owning the work products you produce, then a client may own all rights to deliverables and could sue you if you try to use them again. Intellectual property provisions can also be included to protect you and your company from being held liable for your client’s own copyright infringement. Finally, we understand that intellectual property is a complicated body of law; therefore, it may be worth spending money on a lawyer who might be able to guide you so you can protect your business!
Liability and Indemnification
In every contract, it is important to detail who is liable for what, and a liability section will clarify this. Think of this in the context of the types of services you will be providing to your client. There may be times where you agree to take on responsibility, but there may be times where the client agrees to be responsible for liability. Having liability terms may also protect you from being held responsible for the liability of third-parties associated with your client. Another important contract term is an indemnification provision, which requires the client to promise that they will defend you against any third-party claims that arise out of the services you provide so long as you aren’t negligent or purposely do something wrong. This term will give you extra protection as you provide services to clients. Because liability and indemnification are both commonly negotiated and complicated contract provisions, this is another area in which it may be a good idea to talk to a lawyer before drafting an agreement or signing one.
You might expect the obligations you and the client have to one another to stop once all of the services are rendered; that is not always the case! Sometimes there are instances where a contract needs to be terminated earlier, and it is important to detail these instances in your contract. You should also consider how things will wrap up once the contract is terminated. Think about any non-refundable fees you may have versus what fees need to be returned to the client as a result of termination, or any legal obligations that you want to survive the contract termination. For example, the rights to your intellectual property for work products and deliverables are likely to last beyond the end of the contract.
Need a Contract, But Don’t Know Where to Start?
If you want to get started on your own contract for services, check out the Trellis Template Library for an affordable Client Contract Template here. This contract is attorney drafted, utilizes these important terms, and can be customized to fit your business’s needs! We also have free resources on contracts that you can find on the Free Resources section of our website here.
DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.