This post was originally published in May, 2012. We’re re-posting in case you missed it.
A freelance professional, whether a management consultant, a graphic designer or a bookkeeper, obtains clients by building a relationship with his or her clients based on knowledge and trust.
Too often, however, the relationship sours because the parties either have not thought out some important issues or because the parties have differing opinions on those issues. For this reason, every freelance professional should have a Services Agreement that he or she enters with each client.
A well-drafted Services Agreement can help you maintain a positive relationship with your clients throughout the life cycle of the engagement.
Here are the top ten issues that your Services Agreement should address.
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.
The services to be performed may be defined in the body of the Services Agreement, or, if it works better, in an attachment to the Services Agreement. They may also be defined on a matter-by-matter basis—using task orders to set out a particular set of services and change orders to modify the list of services.
2. Who will provide the equipment required to perform the services?
In addition to specifying the services that you will provide, also identify who will provide the equipment necessary to carry out your services.
For example, if you agree to give a presentation, who will provide the conference room space, podium, and projector? You should avoid any misunderstandings on these issues by covering equipment in your Services Agreement.
3. How will your client compensate you?
You want to get paid by your client!
The Services Agreement should specify the amount that the client will pay you, both for the base services and for any additional work that may need to be performed.
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.
Also, you should specify which out-of-pocket expenses, if any, will be reimbursed to you by the client.
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 also 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?
If the Services Agreement will be renewable, include terms that specify when it is going to take place.
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 if the client does something particular bad; make sure to tightly define that list of bad things.
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?
As a freelance professional, your relationships with individuals you place on a client job may be critical to your business.
You want to avoid having your client cut you out of the loop by directly hiring a person you placed. 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).