Don't Sign A Client's Contract Without Checking These Ten Things...
Don't just blindly sign a client's contract. Check these ten things first - even if you use AI tools to do it.
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Don’t Get Caught Out By Client Contracts
As I’ve mentioned previously, most consultancy arrangements don’t have a singular ‘contract’, but are instead two separate documents.
These are:
The Master Services Agreement (MSA) which covers the overarching relationship and means of working between you and the client.
The Scope of Work (SOW) which covers the specific project you’ve agreed with the client.
You should have your own templates for each of these and be ready to produce them for clients to sign and get started.
You Will Often Sign The Client’s Contract
In practice, it’s common for the client (especially larger organisations) to ask you to sign their MSA (often with the deliverables specific in your SOW attached or serving as the reference point).
This is fine (and often unavoidable), but be mindful in these situations that while your contact might be acting in good faith, the contract was almost certainly written by an in-house legal team to protect the organisation.
99% of the time, this won’t be a problem. You will do the work, get paid, and everything will be fine.
But it’s worth reviewing these contracts for the 1% of times when problems arise.
Here are ten things I’d look out for.
1. Scope of Work and Deliverables
Remember the golden rule, if it’s not in the signed SOW, it doesn’t count.
Most clients ask us to create this section which they can copy and paste in their templates. So this usually isn’t a problem.
But make sure this reflects your scope of work and your client discussions. Be clear about what’s expected of each party and when.
Check the following:
Specificity. Check the SOW clearly defines deliverables, timelines, and expectations to avoid scope creep.
Revisions: Include a process for revising the scope if the project changes - as projects are want to do.
Acceptance Criteria: Clearly outline how the client will approve completed work. Aim for the two-revision rule.
2. Payment Terms
This is probably the first thing I check in the contract. To avoid running into payment problems, check the payment terms very carefully. Specifically, pay attention to:
Payment Schedule: Verify that payment terms (e.g., hourly, milestone-based, or fixed fee) are clear. Try to avoid hourly rates and breakdowns of fees.
Late Fees: Include penalties for late payments. You should be compensated if they don’t pay on time.
Reimbursement: Specify if expenses (e.g., travel, tools) will be reimbursed and under what conditions.
Currency and Taxes: Confirm the payment currency and responsibility for taxes (e.g., VAT, GST).
Use AI tools to check for booby traps. One organisation granted itself a 2% discount for paying invoices on time. Insane - but these things happen.
Outside of this you should also check what payment system (if any) the client uses. If it’s Ariba, add on an extra 5% to your fee - just trust me on that.
3. Intellectual Property (IP)
I once created a course for a client’s in-house team with some templates and resources. I later discovered that client began selling the course to their own customers. It’s rare, but it’s good to check who owns any of the IP created during the project.
Ownership: Review who owns the IP created during the project—ensure you're not giving up more rights than necessary.
Licensing: If you retain IP, include licensing terms for client use.
Pre-Existing Materials: Protect any pre-existing work you bring to the project.
If it’s a high-value project, have a solicitor review the terms. Otherwise, I’ve found ChatGPT can give you the right language to use here.
The key thing is you don’t assign clients the rights to work you want to use elsewhere.
4. Confidentiality and Non-Disclosure
You will sign an NDA for the majority of clients you work with.
If they fail to provide one, make sure the client signs your NDA.
The two key things to check here are:
Reasonable Terms: Confirm that confidentiality clauses are specific to the project and do not unreasonably limit your ability to work with other clients.
Duration: Ensure non-disclosure obligations are time-limited and reasonable.
It’s important to note that the NDA will specifically prevent you from creating a case study or sharing anything about the work without permission.
5. Indemnification and Liability
It’s important to know the extent you could be held responsible for in contracts and ensure you have the insurance to match. A few things to check:
Limit Liability: Look for clauses that unfairly hold you liable for indirect damages or losses.
Cap Liability: Ensure your liability is capped, ideally at the amount of fees paid under the agreement.
Indemnification: Avoid agreeing to broad indemnification clauses unless they’re mutual.
6. Termination Clauses
This is the big one to check carefully. What happens when priorities change and a client might suddenly end a contract. Do you still get paid? If so, what do you get paid for and how?
Imagine for example you work on a 4-month project where 75% of the work takes place in the first month. However, the client terminates the contract after one month and asks you to charge them 25% of the fee.
Generally you want to see the following:
Notice Period: Ensure you can terminate the agreement with reasonable notice.
Fees for Early Termination: Clarify what happens if the client terminates the project early.
Reasons for Termination: What are the provisions in place which enable a client to terminate a contract?
Unpaid Work: Include a provision for being paid for work completed up to the termination date.
This is probably the clause where I most often give feedback.
7. Dispute Resolution
I’ve never had to make use of dispute resolution mechanisms, but it’s important to know which country has jurisdiction over your contract.
Check two things here:
Governing Law: Confirm the jurisdiction and governing law are favorable to you.
Arbitration vs. Litigation: Understand how disputes will be resolved and avoid overly burdensome processes.
For a company like mine, based in the UK, most western countries are fine with similar principles and precedents for resolving issues. However, I’d be more concerned signing contracts for countries whose laws differ significantly from the USA.
You don’t want a situation where you’re arrested at an airport because an old client pursue a legal claim against you.
8. Non-Compete and Non-Solicitation
These two are increasingly rare to see in contracts these days, but they do come up from time to time and you need to be cautious about them.
Non-Compete: Check if there is any non-compete which prevents you from working with other organisations in the sector.
Non-Solicitation: Review any restrictions on hiring or soliciting the client’s employees. This still pops up in contracts, but it’s rare - and largely irrelevant.
Aside: Don’t ever sign a non-compete. Non-competes can cost you more revenue than you earn. In the current age, where so many organisations participate in so many sectors, it’s nuts to sign a non-compete. Imagine signing a non-compete to work with Alphabet - do you just realise how many sectors you can no longer work in?
9. Work Status
You should check the following:
Independent Contractor Status: Confirm you’re being engaged as an independent contractor, not an employee.
Subcontracting: Clarify whether you can use subcontractors or other resources to fulfil the work.
It’s always in the client’s interest to clarify you as a contractor. However, many contracts prevent you from using subcontractors (even if they are being treated as employees on your side).
So check this provision carefully.
10. Miscellaneous Clauses
The final few things to check are:
Force Majeure: Ensure there are provisions for unforeseen events (e.g., natural disasters) that may delay work.
Entire Agreement Clause: Understand that this clause means verbal agreements outside the MSA/SOW won’t hold.
Amendments: Confirm how changes to the agreement must be documented (e.g., in writing).
Do You Really Want To Read All The Terms and Conditions?
You almost certainly should, because you never know what might be lurking in there.
But these days I’ve found AI can do a pretty good job of taking the major concerns about and immediately identify any potential issues that need to be addressed - along with recommended changes which I can immediately feedback to the client.
So if you want to save yourself a little time, use AI bots to identify issues and suggest potential changes.
Good luck!
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