05 Jan Client Services Agreement – Key Provisions
A well-written client services agreement is an essential tool for small businesses in the services industry. It forms the basis of your relationship with your client including everyone’s expectations, rights and obligations. Having your own master client services agreement allows you to present the initial terms of service to the client as opposed to the client proposing the terms of the relationship. It also conveys professionalism.
Below are some of the key provisions that should be included in any master client services agreement:
Payment and Payment Terms
It is important to identify whether the project services will be completed on an hourly or fixed fee basis. In some cases, it is not possible to identify precisely the number of hours it will take to complete the project. However, you can include an estimate based upon the needs of the client, which should be tied to the scope of services. Any retainer should be identified in the agreement, along with an explanation of how the retainer will be applied to invoices and whether the retainer must be replenished. The schedule of payments should also be clear. Are you billing the client monthly? Is the billing tied to deliverables?
Scope of Services
Spending time crafting the scope of services on any project is worthwhile. Scope creep is a frequent frustration for service providers. Including a detailed description of what the deliverables are going to be can avoid disagreement about what is or is not included later on in the project to ensure that you are fully compensated for your services.
Duties of Each Party
It is important to identify not only what your obligations are, but also what your client’s obligations are. Is the client going to provide certain information so that you may complete the scope services? If so, the client should appoint a client representative to streamline the process. Is the client going to provide approval of the work that is completed? If so, the agreement should identify when and how such approval will be granted. The agreement should also require that the client act reasonably in providing approval.
It is important for any client services agreement to identify what services will be considered “additional”. These are usually services that are not defined within the scope of services and are often the result of client change requests. A clear description of what will be deemed outside the scope of services and how additional services will be billed is essential. If the scope of services is to be billed on an hourly basis, will the standard hourly rate apply? If the scope of services is to be billed on a fixed fee basis, will you then bill additional services on a time and material basis, and if so, what is your hourly rate?
Late fees should be spelled out clearly within the client services agreement. You should determine what the industry standard is for late fees associated with untimely payment. Michigan law limits the amount of interest that may be charged on an account.
For those who are creating something for their client, there may be intellectual property issues that need to be addressed. It is important to spell out who owns the deliverables once the work is completed, what rights, you, as the creator has with respect to the deliverables (can you use it with other clients, can you use it for your portfolio, etc.), and what rights the client has upon completion of the project (can the client modify the deliverables, can the client obtain copyrights or trademarks of the deliverables, what are your obligations to assist the client in doing so, etc.). The client’s rights in the intellectual property, to the extent that there are any, should be conditioned upon full payment of the agreement price.
While you never go into a client relationship with the expectation that there may be a dispute, it is a good idea to include a dispute resolution provision. You can agree to mediate any disputes before going to court to save yourself from spending more time, money and energy in pursuing litigation in court. You can also agree to arbitrate any disputes in lieu of going to court.
If you work with multiple clients on a variety of projects involving different scopes of services and fees (hourly versus fixed fee), a master client services agreement can save you time and money. It can be tweaked for each new client to address differences in the scope of the services, pricing and the payment schedule by simply modifying those provisions or referencing an exhibit that lays out in detail the scope of services and the fee schedule.