Client Engagement Agreement: Essential Clauses

What is a Contract?

A contract is formed through offer and acceptance [(Section 1 of the Contracts Law (General Part), 5733-1973)]. A contract may be oral, written, or formed in any other manner, unless a specific method is prescribed [(Section 23 of the Contracts Law)]. For example, an agreement concerning real estate (ownership, lease, loan, mortgage, or easement) must be in writing [(Section 7(a) of the Land Law)].

Generally, a contract with a client does not need to be in writing. Oral agreements, if proven, are legally binding. However, a written contract is often essential for preventing difficulties. Even a work order, a series of correspondence, or a detailed invoice can constitute a legally binding contract.

Does Drafting a Contract Require a Lawyer?

There is no legal requirement to use a lawyer to draft a contract. Even a real estate sale agreement can be drafted independently, although most people prefer not to due to the complexities involved.

The need for a lawyer depends on the nature of the agreement. For complex commercial agreements or those involving sensitive matters (e.g., beauty treatments with medical aspects), professional advice is advisable. However, for simple agreements, a few clauses may suffice.

Are There Mandatory Contracts by Industry?

No. Most industries operate according to established practices. For example, many nail salons display a price list and terms (e.g., refunds, damages). Such a clearly displayed sign constitutes a sufficient contract.

Freelancers (e.g., plumbers, electricians, painters) often do not use contracts. A better practice is to clearly state the terms on a work order signed by the client before commencing work.

Essential Clauses in Client Contracts – For All Businesses

Date of Contract Execution

Clearly state the date alongside the signatures. For contracts displayed in a business, maintain records of the date of display and note it on the sign itself. This protects against claims that the sign was not in place or had a different wording at the time of the transaction.

Definition of Services/Products and Delivery Dates

Specify the service/product; contract duration; delivery dates; and method of delivery.

Payment Terms and Conditions

Many payment arrangements exist. However, key aspects include:

• Cost of the product/service;
• Payment milestones;
• Final payment date;
• Agreed payment method;
• Penalty for late payment (interest, delayed service/product delivery).

Terms for Cancelling the Agreement (Including Consumer Protection Law)

Consumer cancellation rights are detailed in the Consumer Protection Law. Even if these are not specified in the contract, they still apply. It is advisable to inform the client of cancellation terms, particularly if offering more favorable terms than those stipulated by law.

This should specify the cancellation method (written notice, address); deadlines; exceptions; consequences (pro-rata refund); etc.

Action in Case of Breach of Contract by Either Party

Define the consequences of breach by either party. For example: service termination; product return; refunds; compensation.

Jurisdiction for Dispute Resolution

Specify the jurisdiction for legal action. This allows the business to sue/be sued in a convenient location, particularly for businesses operating nationally or online. Without this clause, a lawsuit may be filed in the claimant’s (not the defendant’s) jurisdiction. A jurisdictional clause prevents this.

Exclusion of External Representations

A clause stating that no external representations (e.g., behavior, oral discussions) are binding, and that any contract modification requires a signed written agreement.

What if a Client Breaches the Contract?

First, attempt amicable resolution. If unsuccessful, send a formal notice outlining the breach and the demands. If this fails or you choose not to send a notice, file a civil lawsuit.

For non-corporate businesses, and claims under NIS 38,900 (as of January 2023), file a small claims suit. Small claims suits offer advantages for smaller disputes: no lawyers; faster process; lower fees; etc.

Dino’s system allows you to generate a small claims suit online, from any device, on any matter, in three simple steps! Dino’s system is a unique Israeli development that enables users to generate a small claims suit independently in about 14 minutes.