Published by Ask General Counsel on InsideNova, 3/8/2022
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Just like the expression “good fences make good neighbors,” you can say that “good contracts make good business partners.”
Time after time clients come to General Counsel P.C. with a business dispute. We ask to see their contact and they either don’t have one, only have a purchase order or similar document or have a horrible contract. In such circumstances, what we can do is limited. When you enter into a business relationship, take the time to look into the future. What are potential disputes? Take the time to think through the relationship. And have an attorney help you create a thorough services agreement.
Here are the top 10 issues that should be addressed within a services agreement.
1. What services will you perform for your client?
Define in detail the services that you will perform for your client. Be as specific as possible. Frequently, if your client refuses to pay, the client will argue that you did not perform the services you were obligated to perform. Specifying the services will help you prove the exact services that you did agree to perform.
2. Who will provide the equipment required to perform the services?
In addition to specifying the services that you will provide, identify who will provide the equipment necessary to carry out your services.
3. How will your client compensate you?
The Services Agreement should specify the amount that the client will pay you, both for the base services and for any additional work (and expenses). Many disagreements arise when more extensive work is required to achieve the client’s goals. The Services Agreement should also specify when the client is going to pay you, whether that is within 15 days of receipt of their monthly bill or upon completion of the project.
4. What happens if your client doesn’t pay?
Of course, some of your clients will not pay you, regardless of the language of the Services Agreement. You can use the Services Agreement to encourage each client to pay by providing that the client will be charged interest, attorney’s fees, and other costs of collection if the bill is not paid on time. Give your client reason to pay you first.
5. How long will this arrangement last?
The Services Agreement should indicate how long your contractual relationship with your client will last. Is it documenting a one-shot deal? Or does the agreement reflect a long-term arrangement where the client will order your services as needed via task orders?
Also, specify the ways in which the relationship may end. You will probably want to build in an escape clause that you, and perhaps your client, may cancel the contract with a particular number of days’ notice. You will probably also want to provide for the agreement to terminate immediately upon certain defined circumstances.
6. Who will own the intellectual property that you create for your client?
Freelance professionals use their ideas to create value for their clients. Those ideas, and the products of those ideas, may be protectable intellectual property. Specify in the Services Agreement whether you or your client (or both of you) will own the intellectual property created under the Agreement.
7. How will your client and you protect each other’s confidential information? Will your client and/or you be allowed to publicize this contractual relationship?
The client is hiring you because you have some expertise that they do not have. What you don’t want is for the client to use you to develop their own expertise and then not compensate you for the information that they’re taking from you. Similarly, you most likely will view some of your client’s confidential information in the course of providing services for that client. Your client and you may bind yourselves in the Services Agreement to keep each other’s confidential information secret.
Sometimes, you or your client will prefer to keep the existence of your business relationship secret. To avoid misunderstandings, the Services Agreement should include provisions that detail whether the parties may publicize their business relationship and how that publicity may take place.
8. Do you want to restrict your client’s ability to hire your workers?
The Services Agreement may include non-solicitation provisions that forbid your client from hiring your workers without compensating you.
9. Will you be restricted from providing services to competing clients?
In the process of negotiating the Services Agreement, your client may request that you not provide services to their competitors. Consider the consequences carefully before agreeing to limit your future client base and ensure that the restrictions are the same as what you discussed with your client. If you agree to such restrictions, make sure you are being fairly compensated.
10. How and where will disputes be resolved?
No matter how well thought-out your Services Agreement, you will have disputes with some of your clients. The Services Agreement should specify the mechanism for resolving disputes: when claims must be made; where the claims will be heard (e.g., in your home jurisdiction or the client’s); and who will decide whether the claims or meritorious (e.g., judge or arbitrator).
For help with a Services Agreement, contact a General Counsel, P.C. attorney or email us at askgc@gcpc.com.