How to watertight your contracts and avoid outrageous client claims
Most of us have had clients who we wouldn’t have touched with a bargepole if we’d known how much trouble they were going to be. Fortunately, time on the job helps us to develop a kind of sixth sense; an ability to tell from the outset whether a potential client should be avoided – regardless of how lucrative the contract appears to be on paper. But intuition can fail even the best of us. Despite our efforts, there’s a constant risk of troublesome clients slipping through the net – and even where the relationship starts off on a strong footing, things can quickly turn sour.
Impossible demands, refusals to pay, false accusations and even legal action: any or all of these could loom into view when faced with an unreasonable client. When a potential dispute arises, being able to refer to a relevant, unambiguous clause in the client contract can be the best way of nipping it in the bud. With risk management in mind, here are some important points to focus on when drawing up those all-important client agreements…
Stay in control
You’ve just shaken hands with a potentially valuable corporate client. You forward on your service contract only to be told that the company would prefer you to sign their standard proforma.
Here, straight away you’re at risk of losing control over how your relationship with the client is defined. Presumably you’ve put considerable thought into the drafting of your own contract. You’re satisfied that it meets the requirements of your professional regulatory body and that it reflects your preferred way of working. Consider carefully how far the client’s suggested contract departs from this – and pay special attention to the allocation of risk in the event that things go wrong. Are you being asked to take on risks such as liability for third party losses and over-running costs that your standard contract specifically excludes, for instance?
In terms of commercial judgement, the dilemma is obvious: as much as you’d prefer to use your own contract, you don’t want to run the risk of losing the client. Balance the extent to which you want the job against how far the contract exposes you to risks and demands that you wouldn’t ordinarily take on.
Be clear on the scope of the work
This is to avoid the situation where your client refuses to pay, claiming that the work provided for in the contract is only part complete. Make sure your contract lists the specific tasks you will be carrying out – in a separate schedule if necessary. For the avoidance of doubt, it may also be wise to stipulate certain tasks that you won’t be doing under the contract.
Agree realistic time frames
In the first place, do not blindly accept a contractually-binding timeframe unless you are confident that you will be able to meet it – and always make sure there is leeway for unexpected delays. Avoid the situation where a client attempts to blame you for time delays that are outside of your control. For instance, if completion of the work is dependent on you receiving certain items from the client or from a third party, you should specify precisely what it is you require and make it clear that you will complete the work “within [x timeframe] of receipt…” rather than giving a calendar date.
Beware ‘Reasonable Care’ v ‘Fitness for Purpose’
Even without a clause in your contract specifically saying so, the law implies that a professional will provide his/her services using the reasonable care and skill that would be expected of a competent member of that profession.
But what if your client is harboring very specific views about what’s reasonable and goes on to try and claim (unreasonably) that you haven’t met them? This is why it is useful to clarify (so far as you can) what you consider as reasonable – and set this out in the contract. For instance, can certain industry-wide benchmarks be applied to the work in question? If so, it’s worth stating specifically that you will abide by them. If there are two separate sets of standards that might possibly apply, it’s even more important to set out which ones you’ll be following to avoid any dispute further down the line.
By contrast, if your contract states that the end product of your work will be ‘fit for purpose’, this gives rise to a whole additional set of issues. Here, you are effectively saying that the results of your work will meet the specific requirements of your customer – so if you fail to meet these requirements, you could find yourself in breach of contract even if you exercised reasonable skill and care.
If ‘fitness for purpose’ clauses are usual practice in your profession, make sure your client’s specific requirements are set out in the contract. The clearer the wording, the less scope there is for a client to argue that those requirements haven’t been met.
Especially when putting together your basic contract template, specialist legal advice can help you identify and close down any gaps that could give rise to disputes. Specialist insurers such as Bluefin Professions can also offer valuable input – not just with providing professional indemnity insurance solutions but also on how to minimize the risk of negligence claims arising in the first place.