Elements of a Good Professional Services Contract

Written Agreement

As I’ve mentioned before, I believe that a well-thought-out written contract is a crucial component to building a successful professional service business. The contract serves a number of important purposes, the primary being the clear establishment of everyone’s expectations. A common mistake made by new professional service providers is to jump into a project without having a written agreement in place. Most people who do this learn the hard way what can happen when all parties’ expectations and obligations are not laid out ahead of time.

A good written agreement protects both you and your clients by explicitly spelling out what you will do for them, what they will do for you, and what happens if something does not go according to plan.  So, when designing your professional service contract, here area few basic elements to consider including:

  • The parties: Who you are (type of entity and state of establishment), who the client is (same information).
  • Scope of work: Aim to make this part of the contract include as much detail as possible. Include a specific list of deliverables for the project and a process for expanding the scope of work, should the client want you to provide additional services. If you are a designer of any type, make sure to specify how many concept revisions are included in the deal and consider including the charge for any revisions thereafter.
  • Term and timeline: It is very important to include important milestone dates and a timeline for the entire project.  This serves to manage expectations and to promote timely deliverables from everyone – you, your client and any third parties.
  • Payment details: Make sure to include specific information on deposits or retainers; payment amounts and due dates; how payments are to be made; and late fee assessments.
  • Intellectual property ownership: Your contract should clearly state who will own the copyright, trademark or patent rights to any information used in or created for the project. Be very specific and include ownership provisions related to any schematics, programs, code, multimedia, graphics, design elements, or any other tangible or intangible resources used in or created during the project.
  • Contract termination: Lay out all of the ways your contract will terminate. Options include: the end of the contract term, delivery of the final payment and deliverables, termination by written notice, and termination for cause if someone does not live up to his or her obligations.
  • Other legal considerations: There are a number of other legal clauses to consider, including warranties, limitations on liability, damages, indemnification, arbitration, and choice of law. Talk to a legal professional for details on these contract provisions.

In designing a contract, your mission should be to make the written agreement comprehensive, ensure it is as easy to understand as possible, and that it serves both your interests and those of your client.  Ultimately, the goal in creating a written agreement is to clarify expectations and obligations and to make sure your most valuable asset – the relationship with your clients – is protected and maintained.

on Thursday, August 12, 2010 at 11:29 am Victoria O responded with... 1 Victoria O August 12, 2010 at 11:29 am

Hey this is great! I predict that this will bring you some customers. Knowing exactly what needs to be covered in an agreement, and then knowing that we mere mortals are totally ill-equipped to do it ourselves, is frightful for us and good for you! Nice job – I hope, actually, that it does cause more small biz owners to get something like this in place. These type of documents help avoid future catastrophies.

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on Thursday, August 12, 2010 at 12:22 pm Kyle responded with... 2 Kyle August 12, 2010 at 12:22 pm

I am glad it helped, Victoria. My primary goal is to inform the small business community about the importance of business systems like contracting, tax, etc and to provide some tools to turn the information into tangible results. A stronger small business sector equals a stronger economy and we all benefit from that!

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on Wednesday, July 20, 2011 at 9:01 pm Dina Eisenberg |Positively Wed responded with... 3 Dina Eisenberg |Positively Wed July 20, 2011 at 9:01 pm

Loved your last paragraph. Can I add one more thing? Your mission is also to create such a transparent friendly clear contract that it becomes a brilliant marketing tool that gets you more referrals.

Your contract can be way more strategic and stress eliminating than you think.

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