Why AI Agency Contracts Are Especially Important
AI projects have ambiguous scope by nature. What "a chatbot that handles customer service" means to you and what it means to the client can diverge dramatically. Contracts don't prevent disputes — they define how disputes get resolved and who wins when they happen.
The Essential Clauses
Scope of work: Specific deliverables, not goals. "Build a customer service chatbot that handles 12 defined use cases, deployed on the client's website via Voiceflow embed code." Not "improve customer service with AI."
Change order process: Anything outside the scope is billed separately. Define the rate ($X/hour) and the minimum threshold for a change order (usually $500+). Without this, scope creep is unlimited.
Payment terms: 50% upfront, 50% on delivery is standard. For projects over $20,000, consider milestone payments. Include late payment terms — 1.5% per month is typical.
IP ownership: Typically, clients own the final deliverable but you own your underlying IP, methodologies, and reusable components. Be explicit about this.
Confidentiality: Client data, business information, and project details are confidential. Define what you can use in case studies (outcomes yes, identifying details only with permission).
Limitation of liability: Cap your total liability at the project value. If something goes wrong with an AI implementation, you can't be on the hook for consequential damages worth 10x your fee.
AI-specific terms: Explicitly state that AI outputs are probabilistic and may require human review. Disclaim liability for AI "hallucinations" or errors in generated content that the client doesn't review. This is increasingly important.
Getting Contracts Signed
Use PandaDoc or DocuSign — both have good templates. Don't use Word documents emailed back and forth. Get signatures before you do any work, even discovery calls. Once you've started working, your leverage to enforce terms disappears.