Different engagement types use different contract structures. Knowing which structure fits your engagement helps you evaluate the document the vendor sends.
Statement of Work (SOW)
The standard contract for defined project work. Covers a specific deliverable with defined scope, timeline, milestones, acceptance criteria, and total fee. Used for: theme customization projects, app builds, migration projects, conversion audits, custom feature builds, Plus implementations.
SOWs work well when the scope is well-defined upfront. They struggle when scope is genuinely uncertain — in those cases, a phased SOW (discovery first, then build) handles uncertainty better than a single all-in SOW.
Master Services Agreement (MSA) plus SOW
For ongoing relationships with multiple projects over time. The MSA covers the umbrella terms (payment, IP, confidentiality, termination, dispute resolution) once; each project gets its own short SOW that references the MSA. Used for: long-term agency relationships, multi-project programs, ongoing development work with multiple discrete deliverables.
The advantage: you negotiate the heavy terms once, then individual projects move faster because most of the contract work is already done.
Retainer agreement
For ongoing monthly services. Covers a regular monthly fee for a defined scope of recurring work or capacity. Should specify what is included each month, what is excluded (typically larger projects quoted separately), response time SLA, reporting cadence, and how unused hours are handled (rollover, burn-down, or capacity-based). Used for: maintenance retainers, email marketing retainers, SEO retainers, CRO retainers, development retainers.
The main retainer risk: vague monthly scope that lets the vendor coast in slow months. Specific deliverables or hour commitments protect against this.
Hourly engagement letter
Simpler arrangement for ad-hoc work. Covers hourly rate, billing cadence, maximum cap (or no cap with weekly reporting), and basic terms. Used for: occasional fixes, consulting calls, troubleshooting, small tasks within an existing relationship.
Hourly without a cap is the riskiest structure for clients. Always set a cap or require weekly written approval to continue past a threshold.
Milestone-based contract
Variant of SOW where payment is tied to milestone completion rather than time-based installments. Used for: larger projects where you want vendor incentives aligned to delivery, not calendar.
Performance-based contract
Rare in Shopify work. Vendor takes a percentage of attributed revenue or improvement (e.g., 15% of email-attributed revenue, 20% of conversion-lift revenue). Sounds aligned but attribution definitions are contentious; tread carefully. Common in some email marketing and CRO arrangements, rare elsewhere.
Equity or revenue-share for app builds
Some app developers will take reduced fees in exchange for equity or revenue share on apps they build. Specialized arrangement requiring careful legal structuring. Not standard practice and rarely the right path.