If you have a service contract, you must have these clauses. Obviously, you include your price and service terms. These add extra protection to you. Additionally, all contracts need the essential elements of every contract.
What is a Service Contract?
A service contract is a contract that deals with the exchange of the labor of one person and the money of the other. You use common law to interpret these contracts. Almost always, these contracts involve an independent contractor relationship.
Collection Costs
You want to get paid. When you don’t, you want clear provisions to ensure you ultimately get paid. Unfortunately, sometimes it costs more to collect an unpaid invoice than that invoice is worth. To avoid that, you should include terms that say the customer pays your cost of collection if they default. Additionally, you want to ensure your nonpaying customer pays your attorney costs. Finally, be sure to add some form of late fee and/or interest since you lose out when customers are late paying their bills.
Termination
In service contracts especially, it is important to have a way out. If the relationship goes sour, you need to be able to back out with little to no issues. For example, if your client hasn’t replied to an email in a month, you need to be able to walk away without repercussion.
Intellectual Property
Regardless of if you’re developing content or inventions for the customer, you should specify what happens to any intellectual property you generate. For example, if you invent a tool that makes your work easier, who owns the rights to that invention? By default, content you generate as a contractor belongs to you. However, it is important to have a clear understanding in the contract. This rule only applies to copyrights, not inventions.
Limitation of Liability
Did you know you can limit your liability in a contract? You can, and should, add a limitation of liability clause to your contract. However, you cannot limit your liability for gross negligence, recklessness, or intentional torts or malfeasance. There are other limitations as well. A safe amount to limit your liability is usually the total amount you would be paid under the contract or amount paid in prior 12 months if longer.
Choice of Law
In any contract where it could possibly cross state lines, you should include a choice of law clause. Essentially, these specify what state’s laws apply if there’s a dispute. I’ve provided a few sample ones here.
Jurisdiction & Venue
You should always include a jurisdiction and venue clause. Unlike a choice of law clause, you include these to pick a location for disputes. If you want to travel less in case of a dispute, you pick the venue closest to home. Fortunately or unfortunately, most contracts with consumers cannot specify a venue that neither party is located in.
If you’d like a review of your service contract or have other questions, please feel free to contact us in the form below. Additionally, we can be reached by emailing info@lawplusplus.com or by calling 919-912-9640.