A contract for services sets the expectations you and your client have for each other. By drawing up a clear and secure contract upfront, you can avoid future issues and confirm you know exactly what your client wants.
How many times have you gotten halfway through a client project and then found out they wanted you to do something completely different? How often do you need to hunt down clients for payments well after you’ve finished your job? If you don’t use contracts for services you offer, issues like this can come up a lot.
Using a services contract sets clear expectations upfront to uncomplicate your job so that you know exactly how to give the client what they want. With the recent growth independent contractors have enjoyed, these contracts are vital to protect you and your growing business. Keep reading to learn what a contract for services is, how it helps you, and what you should have in yours.
- What is a contract for services?
- Types of service contracts
- How a contract for services helps you
- Who needs a contract for services?
- How to make a services contract
- Services contracts simplify your job
What is a contract for services?
A service contract is a legal agreement between you and your client that outlines the scope of the job you’ll do. The terms of this agreement generally include:
- The timeline of the contract
- A description of the work you’ll complete
- A payment schedule
- Roles and responsibilities for all parties
It lets all parties agree on the services rendered so you can enter a legal working relationship with a client without being an employee. If anyone doesn’t fulfill their responsibilities, the other party can sue for a breach of contract.
You or your client can also set security clauses in the service contract. These give the client additional security against some common risks they face with professional contractors. You may often see clauses like:
- Non-compete clause: The contractor can’t start working with a competitor to the client for a certain amount of time
- Non-solicitation clause: You can’t try to hire the client’s employees or other contractors after the contract ends
- Confidentiality clause: You can’t disclose confidential information that you might learn during the job
Types of service contracts
The type of service contract you need depends on the nature of your job. Certain contracts are better for one-off jobs, while others are more suitable if a client needs ongoing services. Here are some of the most common types of service contracts you might use.
1) Fixed bid or fixed scope
If you enter a fixed bid or fixed scope contract, you receive a set amount for completing one project. For instance, you could sign a fixed-scope contract to film a wedding.
It offers clients cost certainty for one-off projects, though there are better types if you need to do ongoing or repetitive work for them.
2) Time and material
A time and material service contract includes an hourly rate for your work. This is usually for jobs that have an uncertain time frame, like reviewing a company’s finances.
Pro tip: Clients can be hesitant to enter a time and material contract with new contractors because they think you might intentionally take a longer time than you need. If you have a history of reliability, demonstrating it to your clients with testimonials and professional sales brochures can help them trust you.
A not-to-exceed (NTE) contract, like a time and material contract, pays an hourly rate. But with an NTE, you and your client negotiate an upper limit for the amount of time or money to spend on the project. The terms of a contract like this will dictate what happens if the job isn’t done when you reach this limit.
A retainer agreement says that your services will be available for a certain amount of time in exchange for an upfront retainer fee. If the amount of work you need to do exceeds your retainer fee, your client then agrees to pay you an hourly rate.
5) Managed services
With a managed services contract, you negotiate a set price for your future availability to provide a certain service. For instance, an IT firm could enter a managed services contract with you to troubleshoot certain problems as they come up. This contract should state the scope of issues you’d work on and how quickly you’ll make yourself available if there’s a problem.
How a contract for services helps you
A services agreement protects both you and your client from misunderstandings by clearly stating the services you’ll provide, how you’ll provide them, and how long you’ll provide them for. It also stipulates all costs for your services, along with the conditions under which you might end it. When your client signs a contract, they’re giving written consent to follow your terms.
For example, you can set “force majeure” provisions that give you allowances for unforeseeable events, commonly called “acts of God.” These provisions ensure that you can’t be liable if such an event makes it impossible to complete your contract. That way, a client can’t take legal action if a cyclone prevented you from fixing their roof, for instance.
Drawing up a contract also allows you to plan out the work you’ll do. This helps you anticipate challenges so you can reduce risks. It’s also a checklist you can refer to if you need to confirm you’ve provided all the services necessary.
Clients also feel more comfortable working with someone who gives them a clear, detailed contract for services. It showcases your professionalism and sets clear expectations so they’re confident that you understand their needs.
Who needs a contract for services?
In general, if you provide a professional service for someone who isn’t your employer, you should have a client contract. If you’re unsure whether you’re an employee, the IRS specifies that you’re an independent contractor if:
- The person you provide work for has no right to control what you do and how you do your job
- The business aspects of your job are not under the payer’s control
- You don’t have written employee contracts or employee-type benefits like a pension plan and insurance
Some industries in which you would want a services contract include:
- Creative (freelance writers, editorial, graphic design)
- Construction (carpentry, electrical installation)
- Events (catering, bartending, DJing)
- Maintenance (interior design, janitorial, housekeeping)
- Transportation (shipping, storage)
- Childcare (day care, nanny, babysitting)
How to make a services contract
To make a contract for services, you need to figure out everything you need to provide your services, everything your client expects to get, and the protections both of you need.
To cover all this, all contracts for services should cover the following details:
- Basic information: This outlines all parties’ names and contact information, along with any relevant definitions for the job.
- Services: This section should give a detailed description of the services you’ll provide. Try to be as specific as possible to minimize the chance of having a contract dispute later on. For instance, if you’re writing up a construction services contract, you should specify the equipment and materials you’ll use, along with the timeframe for completion.
- Responsibilities: This section explains exactly what you’ll provide, along with any details like cleaning up after the service or performing maintenance after starting the service. If your client has to prepare for the service in any way, you should also include that here.
- Payment: This describes your compensation plan. It should cover whether you’ll get a one-time or recurring payment, along with the amount, time of payment, type of payment (cash or check), and any conditions. You should also cover how to handle late payments, especially for ongoing work.
- Protective clauses: Clients may want to include protective clauses, depending on the type of work you’re doing. It’s important to state their protections to address any concerns they might have.
- Ownership rights: If you produce something — either a material object or intellectual property — as a part of the service, you should address the details about its ownership. For example, if you’re a production house that films a live event and provides an edited video, your contract should state who owns the video and the raw footage.
- Dispute resolution: Agreeing on your mechanism to sort out disputes ahead of time will avoid most major issues that might arise while the contract is in effect.
Many specific provisions, like indemnity, liability, legal expenses, and property return, depending on the nature of the job you’re doing. Researching templates or sample contracts in your industry can help you figure out what matters most for your services contract.
Pro tip: Write your contracts in clear, simple English whenever possible. Clients can be hesitant if they see too much technical or over-complicated language.
Services contracts simplify your job
While you might not feel like it’s worth taking time out of your busy schedule to write up a contract for services, it’ll save you much more time down the line. With a written notice that both parties agreed to, you’ll have much fewer disputes and miscommunications about both your and your client’s obligations.
Contracts are a crucial part of your clientflow as a service provider. Without them, your booking process isn’t complete, and your business can become vulnerable.
If you want to start using contracts but also want to save time, you may find HoneyBook’s online contracts useful. HoneyBook members can use its customizable contract templates to draw up their contracts in minutes. Becoming a member also gives you access to interactive files that let you combine contracts with other parts of your process, like invoicing, payment processing, and scheduling.