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A contract is a legally binding document that underpins the relationship between two parties. Indeed, it outlines the rights and obligations of each party. One of the most crucial contracts for any business is a client agreement. Most businesses will have clients, so having an agreement that manages this relationship is vital for business success. Your client agreement will set out what each party requires and how parties will exchange products and payments. This article will outline what terms are most important for your client agreement.

What Terms Should I Include in My Client Agreement?

The terms that you should include are:

  • type of service;
  • payment terms;
  • liability;
  • liquidated damages;
  • intellectual property; and
  • termination.

Type of Service

The most important term you should include in your client agreement clearly outlines what service you are providing to your client. This is to ensure the client is clear on what they are getting. The last thing you want is for your client to complain that they did not receive what was agreed.

This clause should also outline how often you will provide the service and whether there is a deadline for the service to be delivered.

Payment Terms

This clause will state how much your client will pay for your services. It should also include when the fees are due and whether the client has to pay any additional expenses. Your payment schedule will differ depending on the type of service you provide. You could receive a:

  • fixed fee for your service; or
  • continuous subscription; or
  • combination of both.

Tip: You could also include a term that allows you to increase the fee after a certain amount of time.

Liability

Setting out your liability in a contract is crucial. You can limit your liability so that you only have to pay a certain amount if the contracting party seeks remedies in court. You can also include a clause saying that you are excluded from liability for any events out of your control. This is so you know what you may have to pay if you breach the contract.

Liquidated Damages

Instead of going to court for a breach of contract by either party, you can include a liquidated damages clause at the formation of the contract. Liquidated damages are an agreed-upon figure that either party will pay if there is a breach of contract. They are useful as they allow compensation without having to go through court proceedings.

However, liquidated damages must be a genuine estimate of the loss incurred. Otherwise, the courts will be able to class the clause as a penalty. This means the clause will not be legally enforceable as it will be considered unfair.

Intellectual Property

Another important clause that you should include in your client agreement is the intellectual property clause. Indeed, your intellectual property needs to be protected. Therefore, the clause can licence your customer to use your intellectual property for certain purposes but not take it for any other use. This is usually in exchange for some sort of payment to you. You could also include a clause that allows your customer to licence that intellectual property with your permission.

You must protect any intellectual property you have created. Indeed, once it has been leaked, you can no longer protect it.  

Termination

Finally, you should always include a clause that allows you to terminate the contract in certain circumstances. These circumstances may be where your contracting party has not upheld their obligations. Another circumstance could be if another deal crops up that provides better returns. The termination clause should also explain how either party can activate the termination clause.

However, you should be aware that your client can also utilise a termination clause if you include a termination clause.

Key Takeaways

A client agreement allows you to make any deal you make with your client legally binding. This means that if your client cannot uphold their obligations, you can seek remedies in court. However, if your client does not uphold their obligations, you should seek to renegotiate the terms of your agreement. This is because you may agree this benefits both parties without having to go to court. You will also save time and money by not going to court. The clauses discussed above are not an exhaustive list but are the most important ones to ensure your client agreement is performed smoothly. 

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

How will I know if my liquidated damages clause is a penalty?

The court will decide if they are a penalty. If it is found to be a penalty, it will be unenforceable.

Can any party terminate the agreement?

Yes, if either party breaks the agreement the other party can terminate it.

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