In any business, whether product- or service-based, contracts should always play a central role. All too often, lawyers are met with clients who have run into an issue because they either didn’t have a contract at all or they had some random agreement pulled off of the internet. Having confidence in your contracts is vital to running a business efficiently and successfully. And while every contract is going to be a little bit different, there are a few key clauses that you want to ensure you have.

What is the customer getting?

In a service-based contract, this usually looks like a scope of work. It is important to lay out in detail what is included for the price. Sometimes it makes sense to write out specific exclusions, too. If you have packaged work that can have additional add-ons, include a price list or hourly rate for out-of-scope services so it’s clear from the beginning.

If you have a product-based business, you should have clear terms and conditions that include details like the fact that colors may be off based on computer screens, and that items that stock is subject to change. Address expected processing times and be sure to clarify whether prices include taxes, shipping, and any other fees.

When both the seller and customer can understand exactly what they’re getting, there is less room for misunderstanding.

Who owns what? 

Especially in the case of service businesses, laying out intellectual property ownership is important. If you provide anything from branding and design to coaching services, you are giving over tangible things to customers, like raw images, data, processes, checklists, worksheets, and more. Intellectual property ownership clauses vary widely and can be significantly different from industry to industry, but here’s what you want to know:

Default Ownership

By default, the creator of anything in tangible form is the owner. That means if you are creating things, even specifically for your customer, you are the owner unless a contract says otherwise.

Contracting IP Ownership

Sometimes it makes sense that the client will be the owner of any intellectual property you create. This is especially true in the case of design-related businesses like website design or graphic design and branding. Even if it makes sense to contract that the client owns the final intellectual property, consider keeping ownership of working files, and at minimum, make sure you have a license to use the work in your portfolio and for marketing purposes. If a client owns the IP and you don’t carve this out, you may be prohibited from sharing the work on your website and social media, or using it as an example to generate more business. 

If you are sharing things like worksheets or handouts in a program or selling digital products, it’s important to ensure the customer is only getting a license to use it personally and cannot share it or re-sell it in any way. If you sell a white-labeled digital or physical product, be sure the license is clear in terms of what a customer can and cannot do with regard to reselling it.

Clear Payment Terms

One of the most common problems small businesses have is getting paid. Having clear payment terms in your contracts is the best way to ensure payments are made properly. A few considerations to include in your contract include:

Fee Details

The full amount due should be very clear, including any add-ons, expenses, or additional fees. Both parties should know up front what things will cost so there is no confusion or mistaken impressions. And don’t forget to include things like payment due dates, late fees, and the right to pursue collections.

Refunds

If some of the payment is non-refundable, be extremely clear about this. Separate it into a new paragraph or have it bolded so it’s not hidden. Many states have strict rules about contracts that have non-refundable payments, so be sure to look at the rules in your state and have language that meets any specific requirements.

Comply with Auto-charge Requirements

If you offer payment plans and you want to charge cards automatically, it is very important to include language that clearly gives you that right and allows the client to affirmatively approve it. This may also require an accompanying credit card authorization form. If you do any sort of automatic payments, don’t forget to include chargeback provisions that require your client to take certain steps before initiating a chargeback with their financial institution. You should also include language that gives you the ability to present the contract in defense of a chargeback and potentially collect fees from the client for improper chargebacks.

Don’t Forget the Boilerplate!

All that legal mumbo jumbo at the end of contracts is actually really important. It’s what makes the contract enforceable, so don’t exclude it! Just a few examples of the legal boilerplate that should be included are:

Governing law and Jurisdiction

Which state’s laws will be used to interpret any conflicts and where will any disputes take place? Conflict resolution clauses are vital in the event you do encounter a problem.

Entire Agreement

This clause clarifies that any prior communication that is not otherwise included in the document is not part of the final agreement. This is especially important if you offer custom services and have gone back and forth about the scope of work.

Waiver and Severability

These clauses allow parties to maintain their rights even if they don’t enforce them initially, and to remove or minimize a clause without otherwise negating the whole contract in the event of a conflict, respectively.

Contract Templates

As with anything on the internet, there are some really good and really bad contract templates. In a perfect world, each business will have a business attorney prepare a custom agreement for its particular needs. But sometimes, using a template is the next best option. If you’re looking for a template, here are a few ways to know if it’s right for your business:

First, try to get a template created by an attorney, and in particular, an attorney that has experience in your industry. Like with our Template Shop, there are quite a few great options out there with templates that were actually created by real lawyers. Those will almost always be better than the automated templates offered through some paid and free platforms.

Second, don’t assume what is right for one business in your space is right for your business. It’s often great to get a contract from a friend in the same business as you, but don’t assume it was created by an attorney or that it doesn’t need tweaking to make sense for your business. Take some time to look through it and understand whether it works for your business.

Finally, don’t be afraid to reach out for support. Whether through your industry organizations, social media groups, legal membership services, or the many free resources available, there are plenty of opportunities to get your contracts together without breaking the bank or your sanity.