6 Contract Tips to Avoid Trouble With Clients

December 21, 2011

As part of our series on helping folks get paid for their work, this guest post is written by the RightSignature team to share some ideas on how to avoid contract nightmares. RightSignature is a tool that lets you get documents signed online and integrates with FreshBooks.

Whether you’re a freelancer, contractor or small business, having a solid service contract in place can be the difference between payday and days of anguish. A contract is ideally brief yet effective but most importantly must cover the terms that are critical to protecting your business. When you’re building contract agreements, here are 6 terms that your contract should include as a minimum:

1. Service Description and Parties’ Responsibilities
Thoroughly and accurately describe the services you will be providing, including deliverables and standards for acceptance. List both parties’ responsibilities, with a focus on what you need from your client to complete your work.

2. Billing Milestones

Establish a timeline of billing milestones, with event triggers or dates as well as fees. Specify invoicing terms and consequences of unpaid bills (e.g. work paused).

3. Ownership

Clarify who owns all of the properties specifically mentioned in the contract, as well as any properties that might not be mentioned, but could come into existence as a result of the contract. Note the exact point in time at which ownership rights to work product pass from you to the client.

4. Jurisdiction

Identify which state’s laws will be used to govern the contract, and where any lawsuit will be litigated. Establishing jurisdiction in your state can deter an out-of-state client from suing you.

5. Liability

If something goes wrong, your liability should be limited to the value of the contract or any amounts you have received from the client. As an example, if you miss a deadline and as a result your client loses a $100,000 opportunity, you want to be sure you’re not on the hook.

6. Modifications and Termination

Clients change their minds, so be sure to describe the costs of any change orders. Require that changes must be made in writing, to avoid “he said, she said” disputes. List the scenarios, if any, under which you or the client may terminate the contract, including guaranteed payments in the case of termination.

Most importantly, be sure to get your contract signed before you begin work. RightSignature lets you send your agreement to the client for legally-binding electronic signature online which means no paper, no faxing, and no waiting. Your clients review and sign in any web browser (or even on a mobile device), and you receive the executed contract immediately. When you send a concise, well-crafted contract, clients will be impressed by your professionalism.

Note: the above is a general set of rules about writing contracts but does not constitute legal advice. Consult a licensed attorney to review your contract.

about the author

This is a guest post for the FreshBooks blog. FreshBooks is the #1 accounting software in the cloud designed to make billing painless for small businesses and their teams. Today, over 10 million small businesses use FreshBooks to effortlessly send professional looking invoices, organize expenses and track their billable time.