January 26, 2023

Is Your Professional Services Contract Effective?

Two people in front of a giant contract, holding a giant pen and a giant magnifying glass

Contracts are a fundamental loss control tool for professionals providing services to others. Ideally, you should use a standard services contract with your clients that includes key elements for your protection. Continue reading to learn why contracts are important and what should be included in a contract.

Why Are Contracts Important?

Well-written contracts provide clear expectations for you and your clients regarding the exchange of services provided and compensation received. They can limit misunderstandings and liability if a dispute arises. Contracts with subcontractors you may use in the course of providing professional services serve the same function.

What Should Be Included in a Contract?

Details are important. Elements of a contract should include:

  • All parties’ information, including contact information, legal business names, and billing addresses
  • Offer and acceptance of terms, including documentation of any revisions arising from the negotiating process
  • Start date of provision of services
  • Rate of compensation, payment schedules and changes in compensation
  • Termination of services, including how payment will be handled
  • Clear and well-defined scope of services that does not extend to unintended responsibilities
  • Indemnification provisions and limitations of liability for the professional
  • Liability insurance requirements for entities providing services

Work with a lawyer when possible to ensure the contract is enforceable.

For a complete understanding of any insurance you purchase, you must first read your policy, declaration page and any endorsements and discuss them with your agent. A sample policy is available from your agent. Your actual policy conditions may be amended by endorsement or affected by state laws.

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