New business wins are exciting.
You send over the contract, it gets signed, and you proceed to dance around the office… Or at least I do.
But if your contract isn’t airtight, and something goes wrong, you won’t be dancing for long.
It’s Not “If,” But “When” Things Go Wrong
It never ceases to amaze me how much of an afterthought contracts tend to be in the agency world. Even some of the most well-established shops rely on two-pagers just waiting to be misinterpreted.
Regardless of your track record, it’s never a matter of if, but when things will go wrong.
Maybe you see it coming, or maybe it’s a surprise.
Some of the most tenuous disputes I’ve seen are clients simply forgetting the terms of the agreement. And if you don’t have that clearly spelled out in detail, you’re going to be playing a dangerous game of he-said, she-said.
What Your Marketing Agency Contract Needs, at a Minimum
So what are the elements you need to cover at a bare minimum? I’ve boiled it down to 12 things below.
But Consider Saving Yourself the Trouble
1.) Defining the Legal Names and Addresses of Both Parties
This seems obvious, but so many contract templates just use boilerplates that never even defines the client.
You need to specify who the agreement is between each and every time. And both parties must be listed by their proper legal names and addresses.
2.) Contract Duration
When does the contract officially begin? When or how does it end?
For some projects, it’s really hard to define an end date. In this case, you’ll just want to define the conclusion as the Contract Scope (see #3 directly below) being fulfilled.
You may run into a situation where there’s a very clear end date requested by the client. This is a very situational, and can be very dangerous. I would make sure you have language that binds both parties to the deadline. You know, just in case the client drops the ball somewhere along the way.
I would also consider charging extra for a date-specific guarantee, especially if the date is going to require ludicrous speed to accomplish.
For retainers, maybe there isn’t a clear ending milestone because the work is ongoing.
For that case, you should define a specific end date to give yourself the option to negotiate a new contract if need be.
3.) Scope of Work
Simply, this is what you’re doing together.
It’s important to get obsessively granular to avoid confusion for both your team and the client’s. Define specific numbers where needed, especially for things like website projects and revision rounds.
Also be careful with industry jargon. Not everyone has the same definition for say a “brand identity.” Some people may think there’s some sort of copy included, while others may completely invent expectations.
If it’s a “brand identity,” explicitly outline the deliverables. Commonly, a logo, type stack, color palette, business card, and short style guide.
4.) An Additional Work Request Clause
Even the best clients scope creep without intending to do so.
You need a framework outlined for handling out-of-scope requests. I’d recommend two levels — small ones handled hourly, and big ones requiring a new sales and contract/addendum process. Decided which it fits into when the request pops up.
And the moment something is out of scope, respectfully call it out. Really, don’t be afraid to do so.
As a side note: clients are always the ones who scope creep. Sometimes the project fulfillment team might misunderstand and forget where to draw the line. Make sure you give them a copy of the Scope of Work and have a process internally for handling out-of-scope requests.
5.) Budget and Payment Schedule
What is the total amount to be paid? How is that payment going to be delivered?
Common delivery schedules:
- Monthly payment (retainers)
- 50 percent up front and 50 percent upon completion (projects)
Are these payments refundable?
6.) Late Payments
When are payments due after invoices are sent out? I recommend starting with a net 21, which means invoice payments are due in full in 21 days. Many clients might advocate for a net 30.
If someone asks for more than a net 30, I’d be cautious and consider a negotiation in exchange for it.
We once had a client ask for a net 90, and in exchange we added a 20% convenience fee on the total budget to make up for our cashflow risk.
You’ll also want to consider a late fee. A common late fee is 3% of the invoice total applied to the late invoice. Although this might not be that much, it is a way of encouraging on-time payments.
What happens if either party wants to terminate the agreement?
You’ll want to specify:
- How much notice is required in order to terminate the agreement.
- What method is required (written letter, email, etc.). Any verbal or text conversation should be followed up with a written notification.
- How outstanding work is handled.
- Refunds—if they terminate the agreement before it’s fulfilled, do they get their deposit back or not? Do they get a percentage?
8.) Breach of Contract
A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of the contract.
This section of your contract discusses exactly what happens in the case of a breach of contract. It can result in an immediate termination of the contract with no refunds (if the client breaches), or a termination and compensation (if you breach it).
Something else you need to consider are actions that would constitute a breach of contract and what happens. A good place to start is with the question of, “What are the most inconvenient things that have happened to you?”
For us, it’s been clients going completely dark for months on end, or missing multiple payments. We even had one client hire another firm to do the same work without us knowing. We have clauses to address all of those situations.
9.) Dispute Resolution Steps
If there is a major issue that can’t be moved beyond, what happens? Do you terminate? If there are outstanding issues, do you move to legal proceedings?
It’s worth your while to consider outlining a dispute resolution plan. This would indicate formal written notice of all issues and a series of meetings accompanied by a mediator.
In the long run, this may prevent legal proceedings and save a lot of money.
- If it must lead to legal proceedings, specify who handles attorney fees. Commonly, both parties handle their own.
This discusses the intellectual property of the processed, systems and final work.
- If your agency utilizes specific processes to create the work, be sure to identify those processes as intellectual property.
- Also identify final products as the property of the client (agencies who “rent” final products like logos or websites are a bit shady in my opinion).
- If particular elements are owned by third parties, be sure to indicate that those are the properties of those third parties.
Also, what happens to concepts shown during the process but not ultimately selected? Who owns those?
Both parties must be protected, from, well, each other.
Unless you state what must be kept confidential and only released with written consent, it’s technically fair game.
Here are items to cover with confidentiality:
- Your agency
- Your pricing and quotes given to the client
- Your processes and trade secrets
- Information discovered about your clients
- Emails sent from your agency
- Your client
- The pricing and quotes you give them
- Their processes, trade secrets or operations
- Unreleased news discussed, but not ready for public
- Emails sent to you from them
What happens if some kind of losses are incurred in relation of your work? Will you compensate the client, or are you held harmless? This is important to consider.
Here is an example of a hold harmless clause:
“[Client Name] agrees to indemnify and hold harmless [Agency] of and from any and all claims, demands, losses, causes of action, damage, lawsuits, judgments, including attorneys’ fees and costs, to the extent caused by or arising out of or relating to the work of [Agency].”
You Really Should Take the Guess Work Out
Consider Reviewing Contracts with People
I don’t do this for every engagement because I assume people read our agreements.
If, however, we’re dealing with someone that I think may be trouble I like to review the contract line by line with them. This helps further secure the partnership and troubleshoot as much as possible.
And there you have it. If you have any questions, feel free to reach out.
Here’s to better contracts and better partnerships,