Fractional Executive Agreement: The Contract Terms That Protect You

A bad contract costs you money. A missing contract can cost you the engagement. After reviewing dozens of fractional agreements, these are the terms that matter most — and the ones executives consistently forget.

Disclaimer: this is educational, not legal advice. Have an attorney review your actual agreement.

The Non-Negotiable Clauses

### Scope of Work Define what you WILL do — and by implication, what you won't. "Strategic financial leadership" is a dispute waiting to happen. "Monthly close review, board financial package, cash flow forecast, up to 2 fundraising support meetings/month" is a scope.

### Hours and Availability - Contracted hours per month (e.g., 20h) - Rollover policy — do unused hours carry over? (Recommendation: no, or max 25% for one month. Unlimited rollover destroys retainer economics.) - Overage rate — hours beyond contracted billed at 1.2-1.5x your effective rate - Response time expectations — "within one business day" protects your other clients

### Payment Terms - Retainer invoiced on the 1st, due net-15 - Late payment interest (1.5%/month is standard) - Pause clause — work stops after X days unpaid, access suspended. This clause alone has saved more fractional execs than any other.

### Term and Termination - Initial term (3 or 6 months), then month-to-month - Notice period: 30 days either side, 60 if you want stability - Termination for non-payment: immediate, no notice required

### Intellectual Property Work product created for the client belongs to the client — but carve out your pre-existing frameworks, templates, and tools. You bring the same models to every engagement; assign them accidentally to Client A and you can't reuse them for Client B.

The Clauses Everyone Forgets

• Non-solicitation (mutual): client can't hire away contractors/employees you introduce, and you should clarify you're free to serve other clients — including, in many agreements, non-competing ones
• Non-exclusivity: explicitly preserve your right to work with other companies. Without this clause, exclusivity can be implied in some jurisdictions
• Indemnification cap: limit liability to fees paid, exclude consequential damages. You're advising, not guaranteeing outcomes
• Insurance requirement: state whether you carry E&O/professional liability coverage
• Authority limits: clarify you don't sign contracts, move money, or hire/fire on the client's behalf unless explicitly authorized

Renewal Mechanics

Auto-renew month-to-month after the initial term, with a rate escalation clause ("rates increase 5% annually" or "rate reviews every 6 months"). Getting the increase in the contract beats renegotiating from scratch every year — and tracking renewal dates across 4-6 clients is exactly what engagement management tools like Fraxo automate, so renewals never surprise you.