By: Sharon Toerek, Principal, Toerek Law and Author, the Agency Protection System
One challenging legal issues all agencies face is documenting their business relationship with the client.
Agencies struggle at this stage for a number of reasons: because they want to be protected without being “off-putting” to the Client; appear professional but not overwhelming in those situations where the project size is smaller; the Client’s culture is less formal, or perhaps the scope of work is very limited.
So the question is: When does the agency need to use a Master Services Agreement, and when is it more appropriate to use less formal Legal Terms and Conditions language in the client agreement? And, if the agency takes the less formal approach, what Legal Terms and Conditions language should it include?
First, What Legal Terms and Conditions Clauses do:
The Legal Terms and Conditions language serves as the basic legal terms of your agency’s business relationship with your client. It looks and feels less formal than a Master Services Agreement, but the language is every bit as enforceable legally. It sits alongside the other more business-focused terms in your Proposal or Statement of Work document, such as work descriptions and agency fees.
This method is a more abbreviated approach to entering into a contract with your Client – combining the Proposal or SOW’s deal terms and work description with the legal protections your agency needs. Together, the language in the completed document serves as your contract with the Client.
When should you use Legal Terms and Conditions Clauses Instead of Master Services Agreements?
I recommend using the shorter-form Legal Terms and Conditions clauses when your agency doesn’t want to use its full Master Services Agreement, either because the work is a short-term or low dollar project, the client is a smaller entity or the type of company with a less formal culture, your time is short to get the relationship documented appropriately, or your agency, for its own reasons, prefers an informal approach to contracting with clients.
Also, some agencies simply aren’t comfortable with a formal Master Services Agreement and, because of their discomfort, rely on loosely drafted quotes or proposal documents or, sometimes, verbal understandings. This is never a good idea and leaves your agency financially and legally vulnerable.
The Legal Terms and Conditions clauses incorporate many of the legal terms and conditions included within the Master Services Agreement, but do so in an abbreviated way. These clauses are meant to be inserted into your agency’s Proposal, Statement of Work, or Scope of Work documents, which both parties will then sign. So the work description, fees, and legal terms, will all appear in one document, which then acts as the contract between the Agency and Client.
What information does your agency need to complete the Terms and Conditions Clauses?
- Completed proposal, quote, statement of work, or scope of work document that describes the work the agency is engaged to do for the Client (the Terms and Conditions will be inserted at the end of that document)
- Choice of language (specifically, do you refer to your agency as “Agency,” by name, or by acronym in your proposal or statement of work? Carry that verbiage through these terms consistently)
- Fees and payment terms for the work, including penalties for late payments and collections activity
- Responsibilities of the client to approve work and provide information in a timely way to the Agency
- Liability limitations and indemnification provisions
- Confidentiality and any competitive restrictions
- Intellectual property ownership of completed work, and when the ownership transfers to the client
Your Agency’s Relationship with the Client Just Got More Complicated – Now What?
Hopefully, the project went well, the agency and Client love each other, and more opportunity presents itself for the parties to work together. But the deal got bigger, the risk higher, and the agency more nervous – or the Client’s legal team wants more substantial documentation. What then?
Remember that you can always evolve the contract documents with the Client as the relationship progresses – if having less formal Legal Terms and Conditions is no longer sufficient to meet the parties needs, evolve to a Master Services Agreement between Agency and Client. More about that in my post about Agency-Client Master Service Agreements on this site.
What’s the easiest way to make sure the Agency doesn’t miss something here? By being proactive and having a toolkit of ready legal agreements, templates and checklists prepared and available for your client business relationships, as well as the many other routine legal matters the Agency will face regularly.
I hope you found this information helpful! If you did, I encourage you to download my free Agency-Client Contract Review Checklist. It has been my experience that every agency struggles, at one time or another, with client contracts, regardless of the size or scope of the project. So I created a free checklist with helpful tips for reviewing agreements as well as issues to watch for when a client offers their own contract for your agency to sign. You can download it here as well as some other free tools.