Contract Clause Library
Third-party costs clause
States how costs for outside tools, licenses, or vendors used on the project are billed — passed through, marked up, or included in the fee.
Projects frequently involve third-party costs the agency doesn't control directly: a stock photo license, a paid plugin, a specialized freelancer. This clause states whether those costs are passed through to the client at cost, marked up by a stated percentage, or absorbed into the agency's flat fee — removing ambiguity from what would otherwise be a case-by-case negotiation on every line item.
Sample wording
Sample language (illustrative, not legal advice)
Third-party costs directly related to the engagement (software licenses, stock assets, specialized subcontractor fees) will be billed to Client at cost plus a 10% administrative markup, itemized on each invoice, with Client's pre-approval required for any single cost exceeding $250.
Red flags
- No markup percentage stated at all, leaving room for dispute over what "at cost" actually includes
- No pre-approval threshold, so surprise third-party costs can show up on an invoice with no prior warning
- No itemization requirement, making it hard for the client to verify what they're actually being billed for
How MarginFlow reads it
MarginFlow extracts the markup percentage and pre-approval threshold from this clause so a detected third-party expense can be checked against both — whether it needed approval, and whether it's being billed at the contractually agreed rate.
Related reading