In Short
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Terms of Business help agencies manage risk, set clear expectations and avoid disputes when working with multiple clients.
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Used alongside an order form or statement of work, they create a binding contract without renegotiating each deal.
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Well-drafted terms can limit liability, protect cash flow and clarify ownership, responsibilities and exit rights.
Tips for Businesses
Review your Terms of Business regularly to make sure they reflect how you actually deliver services. Clearly define scope, fees, client responsibilities and liability limits, and include strong payment and termination rights. Always update your terms when you introduce new services, handle personal data or take on higher-risk work.
Table of Contents
- How Do Terms of Business Work in Practice?
- How Can Terms of Business Protect an Agency?
- Which Terms Can Protect An Agency From Risk?
- Scope of Services and Changes
- Fees and Payment
- Client Responsibilities
- Limitation of Liability
- Intellectual Property
- Confidentiality and Data Protection
- Termination Rights
- When Should an Agency Take Legal Advice?
- Key Takeaways
- Frequently Asked Questions
Busy agencies delivering services can face numerous challenges and legal risks, particularly when they are regularly working with multiple clients. In such circumstances, issues and misunderstandings can quickly escalate into stressful disputes without the right regulation in place.
Terms of Business are a crucial risk management tool for agencies across different industries. They provide a framework for both risk reduction and management of client expectations.
This article explains how clear, well-drafted terms of business can help protect agencies when tailored to how they operate.
How Do Terms of Business Work in Practice?
Terms of Business are essentially a set of legal requirements that form part of a contract between the agency and the client’s business. Typically, they will be used alongside:
- an order form;
- proposal; or
- statement of work.
The order form highlights the details of the engagement, such as the services, price and length of the agency agreement. The Terms of Business set out the legal terms that apply.
The order form (or similar document) should clearly and correctly incorporate the Terms of Business. When clients accept the order form, they also agree to the Terms, and both documents will form a binding contract.
How Can Terms of Business Protect an Agency?
Terms of Business protect agencies by clearly allocating responsibility and risk. They define the necessary information on agency and client obligations, helping to avoid costly disputes caused by unclear or mismatched expectations.
In the event of a disagreement, the Terms of Business provide agencies with a clear written reference. Rather than relying on informal discussions or assumptions, agencies can refer to the agreed terms to validate their position.
Terms of Business also help agencies manage legal and financial exposure. Agencies can reduce the risk of costly legal claims and give themselves remedies in certain circumstances against clients who breach their obligations by:
- limiting liability;
- imposing robust payment rights; and
- helpful termination procedures.
Which Terms Can Protect An Agency From Risk?
Each set of terms should be tailored to how the agency actually delivers its services and designed to manage risk. There are a number of common key clauses to help protect a company from risk.
Scope of Services and Changes
Scope provisions protect agencies by clearly specifying included services and usually state that the agreed deliverables are listed in the order form or statement of work. This helps agencies clearly define their services and avoid work expanding beyond what was agreed.
Including change control provisions can also assist by requiring clients to approve additional work and costs in writing before it begins. These provisions can clarify how changes affect fees or timelines and help prevent costly disputes over unpaid work.
Fees and Payment
Payment terms are important to protect agencies. They explain commission structures, how fees are calculated, when invoices are issued, and when payment is due. Clear, standard terms can:
- speed up payment;
- support cash flow; and
- reduce late payments.
Clauses dealing with expenses and third-party costs should make clear which costs are not included in the service fees, such as external suppliers needed for a project. This helps avoid disagreements about what the price covers.
Client Responsibilities
Client responsibility clauses protect agencies by clearly stating the:
- information;
- approvals; or
- access rights the client must provide.
The clauses should also make clear that delays from the client can affect timelines. Setting this out in the terms of business helps reduce the risk of the agency being blamed for delays it cannot control.
Limitation of Liability
Limitation of liability clauses are very important for protection. Without them, liability for a breach of contract can be unlimited. These clauses usually limit the types of losses an agency is responsible for and set a financial cap on how much it may have to pay. This helps keep risk proportionate to the work being done.
Intellectual Property
Intellectual property clauses protect agencies by clarifying who owns the work created and how clients may use it. Agencies may want to keep ownership of their existing materials and tools, while giving clients a licence to use the deliverables once payment is made. This protects the agency’s know-how while still giving clients the rights they need.
Clients may negotiate this position, especially where the agency has been engaged to create bespoke work.
Confidentiality and Data Protection
Confidentiality clauses protect agencies by limiting how clients can use or share sensitive business information exchanged during the relationship, and often continue to apply after the contract ends.
Where agencies handle personal data on behalf of clients, data protection clauses are essential. They set out who is responsible for what and make sure the contract meets UK data protection requirements.
Termination Rights
Contract termination rights protect agencies by setting clear rules for when and how either party can end the contract. These clauses usually cover notice periods and specific exit obligations.
When Should an Agency Take Legal Advice?
Every agency is different and faces its own risks in client relationships. Agencies should consider getting legal advice when drafting or updating their Terms of Business to make sure they are appropriate and provide proper protection. Poorly drafted terms may not protect the agency or could be unenforceable.
Legal advice is particularly important for a review of terms if an agency:
- introduces new services;
- works with consumers;
- handles personal data; or
- takes on higher-risk projects.
In these cases, important drafting changes may be necessary. A commercial solicitor can help ensure terms of business are legally sound, tailored and effective over time.
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Key Takeaways
Terms of Business provide an important risk-management tool for agencies delivering services. They allow agencies to:
- standardise their contracting process;
- save time in negotiations; and
- reduce legal and commercial risk.
Strongly drafted and tailored Terms of Business can support smoother client and agency relationships by managing expectations, but also deliver clear protection when problem issues arise.
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Frequently Asked Questions
Usually, agency agreements rely on standard Terms of Business for efficiency and consistency, to avoid bespoke contracts and negotiations. However, bespoke amendments to Terms of Business may be requested by clients and are appropriate for higher-risk or unusual engagements. Legal advice can help an agency determine how to tackle negotiations.
Bespoke Terms of Business should fully reflect how the agency actually delivers its services in practice and manage risks relevant to such services. Generic templates may not address key issues such as increased project requirements, intellectual property ownership, data processing, and setting appropriate limits of liability. Tailored key terms also support compliance with UK law and reduce the risk that important clauses are unenforceable or unsuitable for the agency’s business model.
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