Here are the 10 Steps to Create a Simple and More Effective Client Contract

It doesn’t need to be difficult to create a client contract. This article will show you how to make and enforce client agreements, while protecting your business.

Client contracts are something you will probably be familiar with if you work with clients. However, just because you are familiar with client contracts doesn’t mean that you will always use them. You can also create a written agreement to protect you and your business when you use them.

It makes perfect sense. Client contracts can be daunting due to all of the legal fine print.

They don’t have the right to be. A client contract is not meant to trap you with legal jargon. It is supposed to provide essential details such as project scope, deliverables and payment.

How do you do this? How can you create a contract that puts you and your client on the right page? How do you enforce the terms of the agreement if your client breaks the agreement? And how can you protect your business?

Why are Client Contracts Important?

Before we get into the details of how to create and enforce a client contract, let’s first take a look at what it is. Let’s first discuss the importance of client contracts.

For a variety of reasons, client contracts are essential for your business.

They put you and your client on the right page. Before you begin working with a client, make sure you have the same expectations about the relationship and/or project.
These clearly outline the key details for your working relationship. Client contracts clarify the details of the engagement (like when and how much you have to be paid by the client) and create a legal roadmap for how the project will unfold.
They protect your company: Written contracts can be legally binding. If your client does not abide by the terms of your contract, you have the right to take legal action (or vice versa).

How do you write a client contract?

Here are the steps to create a client contract that is simple and effective.

1. INCLUDE CONTACT INFORMATION FROM BOTH PARTIES

A written contract must clearly state who is legally bound to it in order to be legally binding. In other words, contact information will be required for all parties.

Each contract should contain the main contact information, legal business name, billing address and contact details for the client as well as the physical address and billing address. Your legal business name should be used. If you have formed a limited liability corporation (LLC) or incorporated it, make sure that the name on the paperwork matches your legal business name.

Throughout the contract, you should continue to use your and your client’s names. It will sound much more personal if you use generic terms such as “client”, “third-party”, or “service provider” throughout the contract. This is not a legal issue but it could be a problem for some clients.

2. SPECIFY PROJECT TIME AND SCOPE

Contracts are about describing the details of your agreement. It is important to be as specific and detailed as possible about the job you are being hired for, how it will be done, and what your expectations are from both parties.

Let’s take, for example, a contract you are drafting to redesign a website. What is the scope? Is the scope of the project defined? Are you only responsible for the redesign, or are you also responsible to write copy and source images? To get started, what assets will you need from your client? What happens if the client requests an additional round of revisions?

When describing the details of your project, you can’t be too specific. It is important to establish expectations and guide the relationship by establishing clear parameters. Although it may seem excessive, clients and you will benefit from the details.

It is not a good idea to make your clients feel that they don’t get what they pay for.

3. ESTABLISHMENT PAYMENT TERMS

You want to be paid for your work. Don’t forget payment terms, which is the most important element of a client agreement.

When establishing payment details for a client contract there are many things to take into consideration.

What you will be paid: Will you be paid per hour or per project?
Minimum and maximum hours. If you are going to get paid an hourly rate, it is important to indicate the minimum and maximum hours. This will ensure that you get paid for all the work you have committed to the project. This will prevent scope creep and provide fair compensation for your client if they assign more work to you.
Project deliverables – To avoid scope creep, it is important to clearly outline the deliverables that you will be responsible for as well as the cost of the project.
Billing Schedule: Clearly outline your billing schedule, in addition to the hourly rate or project rate. If you get paid per hour, do you plan to bill according to a set schedule, such as every week or month? If you bill by project, when will milestones be reached?
Payment schedule The billing schedule describes when you will bill the client, but you must also include a payment plan. The payment schedule will outline how long it takes for the client to pay you once they receive your invoice. It could be 15 or 30 days. The payment schedule should also include any penalties that the client may face if they fail to follow it, such as a late fee.
Acceptable payment options: You’ll want to mention this in your contract if you accept only certain payment methods (e.g. FreshBooks Payments or a business check)

4. SET THE SCHEDULE

You will need to outline all deadlines for the project. This includes billing and payment schedules. You should clearly state what the client will need to do for the project and the deadlines.

For example, “[Your company] will deliver the first comp within three weeks of receiving X asset from [your customer]” or “The client must review submitted drafts and respond with any edits requested within 48 hours after receipt.”

5. DECIDE WHAT HAPPENS IN THE EVENT A CONTRACT IS TERMINATED

Sometimes projects don’t go as planned. If your client pulls out of the project, you need to ensure your business is protected. You should also be paid for any work that you have already done.

Include a clause in your contract that clarifies that all payments received are non-refundable if the project is terminated. If you plan to invoice the client throughout the project, this is essential. This will ensure that you don’t do too much work and have your client cancel the project.

You can also add language that says that if the project is delayed by more than 30 calendar days, you will invoice for the work done up to that point. This will be in accordance to the contract’s payment terms.

If you are charging per project, it may be worth adding a “kill fee”. This is a fee the client must pay (typically 25-35% from the project cost) if the project is terminated early.

6. DETERMINE WHO OWNS FINAL COPIYRIGHTS

This may not apply to all clients or businesses, but if you are creating original work (e.g. a web design or graphic project), you might want to set the copyright terms and include any drafts or comps.

The rights to any work produced by the service provider are generally owned by the provider until final payment is made. Once payment has been made, the rights to any produced work are transferred to the client. They can then do whatever they like with the work. To ensure that your client is fully informed about any concerns you have regarding copyrights, or to create a new copyright engagement, you should outline this in your contract.

7. ADD SOME LEGALESE ABOUT WORKING RELATIONSHIP

You might want to add language to say that you are an independent contractor and you will pay your taxes.

This is why it is important. For incorrectly classifying employees as contractors , companies can be in trouble with the tax agency. To avoid potential problems when it comes to tax time, they can include language in their contract that states you are an independent contractor and will pay your own taxes.

You can use whatever language you like to identify yourself as an independent contractor, but you can also use this contract template.

“It is understood that Contractor X is an independent contractor in relation to Company Y, and not an employee. For Contractor X em>, Company Y will not offer fringe benefits such as vacation pay or health insurance benefits.

8. SPECIFY YOUR CHOICE IN LAW AND VENUE

Contracts in the United States can specify which state will govern disputes and where they will be resolved. This can be useful if your client and you are in different states. You don’t need to choose another state unless you have a reason. If you end up having to settle a matter, you don’t need to travel out of state.

9. CONSIDER ADDING A ARBITRATION CLAUSE

In the best case scenario, you won’t have to resolve a contract dispute. If you do have to resolve a contract dispute, however, it is possible to use arbitration. In this case, an arbitration clause should be included in the contract. A neutral third party will listen to both sides’ evidence and take a decision if there are any disputes.

What is arbitration’s benefit? Arbitration is usually quicker, easier, and more affordable than courtroom litigation. Arbitration can be more private and less hostile than going to court. Consider including an arbitration clause in your contract if you feel it is the best way to resolve the dispute.

Important to remember that even though you may not have an arbitration clause, if your client and you have a dispute, you still have the option to choose an arbitrator, as long as both of you agree. It could be difficult to reach agreement if your relationship has become strained.

This sample arbitration clause can be used to help you find the right verbiage for your contract.

10. BOTH PARTIES MUST SIGN THE CONTRACT

Only two parties can sign contracts. Once your contract has been signed, you must get a signature from the client before proceeding with the project.