Chapter 1: Contracts that Define Client Relationships
Perhaps the most fundamental of all your contracts, your client contracts outline the work you do and the manner in which it will be done. Client contracts are useful for two reasons:
- They can prevent miscommunications with your clients, which can help you dodge a lawsuit in the first place.
- They can limit your liability, which makes it harder for a client to successfully sue your business.
What Your Client Contracts Should Include
In a nutshell, client contracts should detail…
- What work your IT business will do. Perhaps the most important part of the contract. It defines the scope of your work: what you will and won't do. It can help you avoid lawsuits if a client accuses you of not delivering on your side of the bargain.
- Project timelines. Project milestones and the final deadline.
- Materials needed to complete the project (if any). This should also specify who is responsible for supplying those materials.
- Cost of the project. Be sure to include when payment is due and how you expect to be paid (cash, check, online transfer, etc.).
- Signatures of both parties. A contract isn't legally binding until both parties sign it.
Depending on the type of work you do, you might also need an indemnification clause to help limit your liability for certain situations. Also called a "hold-harmless" clause, this part of your contract divides risk between the parties. However, these clauses are finicky and are best left to your legal advisor because the language has to be exact.
A strong indemnification clause can help you…
- Establish conditions for when you can't be held liable for losses related to your work (e.g., the customer doesn't correctly use the software you installed, which allows their network to be breached).
- Place risk on those best able to control risk factors.
- Minimize the impact on your claims history, which can keep your insurance costs low.
Now that you know the basics, let's look at some specific types of client contracts and what they include.
Next: Part 1: Examples of Client Contracts