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All business owners will be familiar with a client agreement. Also called a services agreement, a client agreement is a legal contract that underpins the dealings between a business and its clients. It can take various legal forms and can sometimes be implied through conduct or agreed upon verbally. The main reason businesses and clients enter into these agreements is to outline each party’s rights and legally bind the terms of the transaction. This means that either party can be liable if they breach the agreement. However, this will only happen if the agreement includes the correct terms. Therefore, this article will outline three clauses you should include in your New Zealand client agreement.

What Is a Client Agreement?

Businesses utilise client agreements to underpin transactions with customers. Most businesses will have a standard agreement distributed and signed by the customer once they reach a deal. However, sometimes the agreement will have to be changed depending on the service you provide or the type of consumer you are dealing with. A client agreement can be formed verbally, through conduct, or you can write it. Most client agreements are formed through conduct but are affirmed by terms displayed by the business.

Scope of Services

The main clause you should include in your client agreement should explain the services you provide to your client. This explanation should be clear and specific. You may have a standard agreement, but this clause will need to be customised to reflect the specific service you are undertaking. 

The scope of services can also contain the payment clause. This is how much your client must pay for your services. The payment clause should also contain how your client should make payment. For example, the payment could be made as a one-off or as instalments. You should also inform your client how you would like them to pay you. This means you might invoice your customer or expect them to pay you via internet banking before the service has been rendered. 

Intellectual Property Clause

You should also determine how you want your client to use your intellectual property. For example, if you are selling a service to your client, they must know that they do not own any intellectual property you are providing them. The intellectual property clause will limit what clients can do with your intellectual property. Therefore, they cannot benefit from the brand you have built. You also do not want your client bringing your brand into disrepute.

Your intellectual property clause could say that you licence your client to use your brand in certain situations. Any circumstance outside of the conditions provided will be a breach of contract, and your client will be liable. Protecting your intellectual property is vital as it can be a business’ most important asset.

Right of Renewal Clause

If you provide continuing service to your client, your contract will stipulate how long this runs for. However, there will usually be a right of renewal clause that allows the client to renew the agreement for a fixed period of time. 

The client can activate this clause as long as the business is happy to keep dealing with them. However, if the client has not upheld their obligations under the original contract, they may choose not to accept the renewal.

Termination Clause

Another clause you should consider including in your client agreement is a termination clause. Sometimes called the cancellation clause, it allows you or the client to terminate the agreement. However, you can only do this in certain circumstances. The agreement itself will prescribe these scenarios. 

For example, most client agreements will stipulate that you can only use the termination clause if either party breaches the agreement. 

It is also important to note that both parties can utilise the termination clause.

Key Takeaways

All businesses will use a client agreement to underpin their transactions with their customers. However, the form it takes can differ depending on the business. Nevertheless, there are several key clauses that you should include in any client agreement so that your business remains protected. Without specific clauses, your business could be subject to exploitation from your client, or you could be forced to continue to contract with a client that loses you money. The principal clauses that you should include in your client agreement are the:

  • scope of the services;
  • an intellectual property clause;
  • a right of renewal clause; and
  • a termination clause.

If you need any legal assistance with contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I have a verbal client agreement?

Yes, but these are rare as it can be hard to prove what was agreed upon between the two parties.

Can I terminate the agreement at any time?

No, you must meet the conditions specified in the contract otherwise, you could be in a breach of contract. 

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