8 Things You Should Include In Your Terms of Service Agreement

Gary Horsman |
Dealing with Clients
| June 20th 2012

If you’ve been a solo freelancer for any significant stretch of time, you’ve probably learned the hard way that a work project can go horribly wrong. They turn out to be life lessons in the long run, but there are ways to protect yourself.

Working with bad projects or bad clients generally boils down to mismatched expectations and inadequate communication. Your best safeguard is to make sure you and your client are on the same page before any work has even begun using a Terms of Service Agreement, which essentially puts into clear, written language what you expect from your client and what they should expect from you.

By submitting a comprehensive Terms of Service Agreement to your client beforehand and having them return confirmation to agree to abide by your terms, you will be saving yourself (and your client) a lot of headaches down the road and avoiding the kind of surprises that can cause a project to get derailed.

1. Billing structure. What are your rates? Do you bill by the hour or by the project? This is important because it’s usually one of the first three questions a new client will ask. Agree with the client what a final estimate includes and what will happen if changes are requested beyond the scope of the initial parameters of the project.

2. Late payment. Determine the grace period within which a client can submit their payment after the invoicing date. The standard practice is 30 days, but you can determine this according to your particular company. Also spell out late fees and/or interest rates for late payments. This will give incentive to your clients to pay their invoices sooner than later.

3. Interim charge caps. I’ve known too many freelancers that have rung up large invoices for major projects adding up to thousands of dollars only to be shafted by deadbeat clients who walk away with your hard work. If you’re working on a major project or are doing several smaller projects for one client that add up to major charges, put a cap on how much outstanding debt the client can carry.

I personally put a $500 cap on my clients so that when their total bill exceeds that amount, they will need to make an interim payment to bring it under or face work suspension. This will prevent clients from promising lots of high-paying business without delivering on their word. This is paramount when it comes to new clients, even those referred by people you trust.

You have the option to waive this cap if you have a long-standing relationship with a trusted client who pays on time and in full.

4. Scheduling. Can you service your clients twenty-four hours a day? Weekends? Holidays? You need to have a balanced life, which means you need to set hours that make sense with your lifestyle. Set appropriate hours when your clients can contact you and expect you to work. If you don’t want to be woken by a panicking client at one in the morning, tell them specifically at what time your shop closes.

5. No spec work allowed. This is a controversial subject among many freelancers and prospective clients. The consensus for most is not to accept work on spec. Speculative work involves doing actual work with the hopes of impressing the client enough that they will provide further opportunities without any guarantee of payment or that you will retain rights over the work if it isn’t paid for. It is bad practice to allow for this type of work with the extremely rare exception of once-in-a-lifetime opportunities. Your time and talent are precious and shouldn’t be doled out for free under any circumstance. Spell it out in the agreement: no spec work.

6. Termination of services by client. If you’re a writer or a designer or another creative professional and you’re submitting a first draft to a client and they are unsatisfied and want to end the project then and there saying something to the effect that your work does not meet their needs, they may be looking to get out of paying for the time you spent already, or worse, intending to steal your ideas for free. An honest client will pay for your time and move on to another freelancer. Otherwise, you’ve effectively just worked for spec and received a rejection. Set a minimum rate for work done that is immediately refused and where the client does not wish to allow you to continue.

It should be stipulated that work that is refused by the client cannot be used in whole or in part. This may or may not be respected, but can be actionable as long as the client has agreed to this term and then subsequently violated it.

7. Ownership rights. Establish who owns the work after it has been completed and what rights the owner has to use or modify the final product. You may also want to consider retaining rights to utilize the work in a repertoire or portfolio for future promotion while the client retains all other major usage rights.

8. Unforeseen or sudden termination of a project. Most freelancers work on their own, so if some mishap, illness or accident occurs that makes it impossible to continue a project in progress, the client needs to know what protections they have. You may have to associate yourself with a backup freelancer who will agree to take over. Otherwise, you can make a provision where files or assets for a project are turned over to the client to be continued by someone else and billed for the work done up to that point.

Whatever you decide, let the client understand that however unlikely, hiring a single freelancer has certain risks and that there will be some compensation or provision made in case of a stoppage.

Most clients will act in good faith, so keep an open mind and be willing to negotiate in instances where there is disagreement. But by explicitly setting the terms in advance, potential disputes can be avoided and you can focus on what’s most important: doing great work.

Disclaimer

You should always seek independent financial advice and thoroughly read terms and conditions relating to any insurance, tax, legal, or financial issue, service, or product. This article is intended as a guide only.

Note: A few times a month we revisit some of our reader’s favorite posts from throughout the history of FreelanceSwitch. This article by Gary Horsman was first published June 12th, 2008, yet is just as relevant and full of useful information today.

Photo by Ana_Cotta.