Are You Updating Your Service Contracts?

If you are running a business, contracts are an essential tool to understand the duties involved from each party. Contracts are needed to level expectations, state the deliverables, and specify each of the parties’ responsibilities. It is also a means to control your costs as a business owner.

But whether you are using contracts for your service business, for your suppliers or advertisers, the key question remains: Do you update your contracts?

As you enter into more contractual agreements, you will find yourself in situations where things could go wrong and will result in cost overruns for you. Worse, the existing contract your clients have agreed to maybe too vague, or the situation may not be specified in the contract.

Take for example a landscape contractor. His contract may include a clause on the company’s responsibility with regards to public utilities like cable TV, electric or telephone lines. However, the contract may have nothing specified, or too vague, with regards to private utilities such as underground pipe drainage. In the event that one of his workers break or damage the underground pipe when working on a landscaping project, the client may demand that the landscape contractor pay or arrange to have the damaged underground pipe fixed. Since the contract was vague and the issue of who’s responsible for such an occurrence is not adequately addressed, chances are the business owner has to fork the extra resources to get that damage fixed.

Or take a website designer. Her contract may state that one of the deliverables will include customized header designs. However, the contract does not specify how many revisions the client can ask. If she meets a highly demanding client who can’t make up her mind, she may find herself designing and revising the header more than 20 times, greatly reducing her billable hours for other clients.

In contracts, the devil is in the details. As you meet new clients or suppliers and experience different situations, you will be better equipped to define the parameters of the relationship in the contract. In the same way that you live and learn, you need to update your contracts to make sure that it reflects your learnings.

Originally published on January 28, 2010. Updated on February 25, 2020.