What to Include in Your First Client Contract?
For startups delivering services or products to clients, having a well-drafted client contract is essential. A strong contract not only outlines the terms of engagement but also protects your company from legal disputes, payment issues, and scope misunderstandings. In this article, we examine the critical provisions every startup should include in its first client contract to ensure clarity, enforceability, and legal protection.
Why Client Contracts Matter for Startups
Client contracts serve multiple purposes:
Clarify Scope: Define exactly what services or deliverables will be provided.
Establish Payment Terms: Outline how and when you will be compensated.
Limit Liability: Protect your startup from legal and financial exposure.
Formalize Expectations: Prevent disagreements by codifying terms.
A well-structured contract builds professionalism and demonstrates that your business is legally prepared and reliable.
Key Elements to Include in Your First Client Contract
1. Parties to the Agreement
Clearly identify the legal names and addresses of both your company and the client. This confirms who is bound by the agreement and is essential for enforceability.
2. Scope of Work (SOW)
Detail the services or deliverables your startup is providing. Be specific about tasks, milestones, timelines, and any client responsibilities. Attach an exhibit if the scope is extensive.
3. Payment Terms
Define:
Payment amount and schedule (hourly, milestone-based, or fixed fee)
Invoicing procedures and due dates
Late fees or interest on unpaid invoices
Clarity here can prevent major disputes and cash flow issues.
4. Term and Termination
Include:
The contract start and end dates
Conditions under which either party may terminate (e.g., breach, notice period)
Any early termination fees or penalties
This provides a legal exit route if the relationship deteriorates.
5. Confidentiality and Non-Disclosure
Protect your startup’s sensitive information by including mutual non-disclosure clauses. This is particularly important when sharing proprietary methods, code, or trade secrets.
6. Intellectual Property Rights
Clarify who owns the work product. Typically, clients expect to own the final deliverables, but your startup may want to retain rights to background IP or reusable components.
7. Limitation of Liability
Limit your company’s exposure by capping damages or excluding consequential damages. For example:
"In no event shall liability exceed the total fees paid under this agreement."
8. Dispute Resolution
Include provisions for resolving conflicts through:
Mediation or arbitration before litigation
Venue and governing law (e.g., Miami, Florida law)
This reduces litigation costs and provides predictability.
9. Force Majeure
Account for unforeseeable events (e.g., natural disasters, pandemics) that could prevent performance. This shields your startup from breach claims in extraordinary circumstances.
10. Entire Agreement Clause
This clause states that the written contract represents the full agreement between the parties. It prevents reliance on verbal statements or informal communications.
Strong Contract Builds a Strong Foundation
A comprehensive client contract is more than a legal formality; it is a foundational document that defines how your startup engages with clients. It minimizes risk, enhances credibility, and ensures both parties are aligned from day one.
To draft or review your client contracts with experienced startup attorneys, call 786.461.1617 for a consultation. We help founders build solid legal frameworks that foster long-term success.