A contract can be as short as a paragraph, but rarely is this ever a good idea. Business owner clients often want attorneys to present them with an ironclad document that protects their interest, punishes non compliance with terms, and rewards fulfillment in about 200 words or fewer. There are certain clauses each contract needs to have for your small business in order to protect you and your investment before any parties add their “X”.
Time of Performance
Business Contracts should be bear-proof. Contact Attorney Nathaniel Gilbert today to discuss how you can better protect your business with better client contracts.
When is the work to be performed, or is there a time consideration at all? Some businesses provide services that where time is of the essence, such as a roofing company or lawn maintenance. Does the contract say when the job will start and the estimated time that the job will take? Does the contract state with specificity the intervals at which repeated work will be done? Instead of “South Texas Gardner’s, LLC will care for your lawn in the summer of 2021,” consider “South Texas Gardner’s, LLC will cut and edge your lawn twice a month during the spring and fall growing seasons, with each cutting being performed no more than 14 days after the previous cut.” Specificity as to time of performance is absolutely crucial when considering interval work that is performed over a course of many months or years.
Work Related Guarantees
Breaking down and carefully crafting your guarantee clause specifically to fit your business and product is crucial to protecting you and your business. Does your contract provide the guarantee for the work being performed, or that there is specifically no guarantee? A criminal defense attorney’s contract should state specifically that there is no guarantee of any particular outcome—the attorney has no way of being able to provide for that guarantee as it is entirely out of their hands. A contract that states such a provision clearly leaves little room for angry clients that believe they were promised a different outcome.
A roofing company may say that their work is guaranteed for a certain period of time after the completion of the repair, but that that guarantee is subject to storms or damaging winds, repairs previously performed higher on the water line by another roofing company, or damage that was not identified on the initial inspection.
1. Liability Clauses: Protect Your Business From Potential Risks
A well-drafted liability clause limits your exposure to legal disputes. This clause defines what the service provider is responsible for and what is outside their control. It protects you from being held liable for indirect damages, ensuring your business can continue operations smoothly in case of disputes. Learn more about forming an LLC Online by yourself.
Example: “The Service Provider’s liability for any claims arising out of this contract shall not exceed the total amount paid by the Client for services rendered.”
2. Termination Clauses: Clearly Define How to End the Agreement
Termination clauses are critical to avoid misunderstandings. These specify how either party can end the contract and under what circumstances. This is especially useful if either party fails to meet obligations, allowing a clear, legal way out without conflicts.
Example: “Either party may terminate this contract with 30 days’ written notice for any reason or immediately for a material breach.”
3. Confidentiality Clauses: Protect Sensitive Information
A confidentiality clause is essential when sensitive information, such as trade secrets or customer data, is shared between parties. It ensures that proprietary information is not disclosed to third parties, providing legal recourse if confidentiality is breached.
Example: “The Service Provider agrees not to disclose any confidential information obtained during the course of this agreement to any third party.”
What are the standard clauses of an agreement?
Standard clauses in service agreements typically include the following:
- Scope of Work: Defines the services to be performed.
- Payment Terms: Details the amount, due dates, and method of payment.
- Liability: Limits the service provider’s liability in case of a dispute.
- Confidentiality: Protects sensitive information exchanged between parties.
- Termination: Outlines how and when the contract can be terminated.
What should be included in every service level agreement (SLA)?
A comprehensive SLA should include:
- Service Description: What the service entails.
- Performance Metrics: Response times, uptime percentages, etc.
- Responsibilities: Clarifies what each party is responsible for.
- Penalties or Remedies: Consequences if the service does not meet the agreed-upon standards.
How to structure a service contract?
A well-structured service contract typically follows this outline:
- Introduction: Names and addresses of the parties involved.
- Scope of Work: Detailed description of the services to be provided.
- Payment Terms: How and when payments will be made.
- Performance Timeline: Dates for when services will begin and end.
- Guarantees and Warranties: If any warranties are offered or excluded.
- Liability and Insurance: Limits to each party’s liability.
- Termination Clause: How and when the agreement can be terminated.
- Governing Law: Which legal jurisdiction will govern the contract.
Actionable Steps for Structuring a Service Contract
Here’s a simple checklist for creating a solid service contract:
- Identify Parties: Include the names and addresses of all parties involved.
- Scope of Work: Clearly describe what services will be provided, including specifics.
- Payment Terms: Specify how much, when, and how payment will be made.
- Deadlines: Outline deadlines or service completion dates.
- Guarantees: State if there are any guarantees or disclaimers about the outcome of the service.
- Termination Terms: Define how and when the contract can be terminated.
- Dispute Resolution: Include how disputes will be handled (e.g., mediation or arbitration).
- Signatures: Ensure both parties sign the contract to make it legally binding.
As a small business, you will be relying on your contracts with clients every single day you are operating and you should take their construction very seriously. Sending a one or two sentence email or a handwritten letter is simply not enough to protect you and your investment if there is ever an issue. San Antonio Small Business Lawyer Nathaniel Gilbert helps business owners draft contracts that protect businesses, their owners, and assets. To learn more about Texas Business Law, Click Here. To contact Nate directly, Click Here.
Forming an LLC or Series LLC in Texas
If you’re considering forming an LLC or Series LLC in Texas, you can learn more about the process by clicking here for LLC formation and clicking here for Series LLC formation. For those exploring a Professional LLC (PLLC) or a Limited Partnership, additional information can be found here and here.
