What is a Service Agreement?

The term “service agreement” refers to a written agreement between a provider or other person offering services or carrying out a business to the client or a customer. It lists both parties’ obligations in completing the task and the payment in respect of the work. The term “service contract” is sometimes known as professional services agreements, customer agreements for services, consultation agreements, or service level agreements.

Who requires a Service Agreement?

A service agreement promises the parties that work will be completed at the amount they agreed to pay and within the time frame. It also helps manage expectations when the work is in process. But, some services do not require agreements.

For instance, if you take your vehicle for service, the odds are that you and the vehicle owner can agree verbally on the cost, the procedure to be done, the method it will be done, and the time. Guidelines, standards, and prices must protect all parties if the work is done over a prolonged duration.

Services contracts are employed for any type of trade, commercial agreement, and relationship. Here are some of the companies and professionals who depend on contract services:

• Management and other consultants for clients.
• Developers of websites and service companies for IT.
• Graphic illustrators and designers.
• Photography and videography.
• Real estate brokers.
• Sub-contractors and general contractors, including those who construct.
• Lawyers and accountants.
• Marketing and advertising professionals.
• Caterers.
• Licenses and franchising between different organizations.

How to use a Service Contract?

Contracts and Service Agreements are often written as an official contracts between customers, consumers, or clients, and both parties must sign. It is, however, more common to get your Service Agreement written in a manner that it is merely placed on the reverse of an invoice or form or proposal and written in a way that the other party agrees to the terms and conditions without having to sign the document.

Why is a Service Contract important?

Using a Service Contract benefits contractors working for the business as well as the clients or customers by clearly defining the conditions of their arrangement. A written agreement allows accountability and transparency for both parties. It assists in avoiding disputes that might be triggered without an agreement in writing between the parties.

Essential components of the Service Contract

We now know what a service agreement is. Let’s look at the components that are required to make one. The template and the design of the agreement must contain:

• Heading/title.
• Description/purpose/scope.
• Information about parties (including addresses, as well as the kinds of business).
• Date.
• Definitions.
• The term refers to the duration of the contract.
• Terms of payment- pricing and pricing adjustments.
• Responsibilities of the provider – Include or add details of the Services and Service Level Agreements.
• Client’s Responsibilities.
• Confidentiality.
• The arbitration and dispute resolution process.
• Termination.
• Force majeure.
• Modification/amendment.
• Signatures.

Title/Handling: The heading or title of the service contract must include the name of the company as well as “service agreement,” “client agreement,” “customer agreement,” or any other name which best describes the circumstance. For instance, the word real estate agents use can be “listing agreement” for contracts that identify homes to be sold. Similar to that, an accountant may employ the phrase “tax preparation agreement,” and the list goes on.

Purpose: The objective of the agreement must be specified in the first paragraph of any agreement. The primary reason for entering into a contract for services is to outline the services the service provider provides.

Parties: Addresses and names of the parties involved, and if one or both of them are business-related, the type of business entity that they belong to, whether it is a limited liability or a corporation firm, must be disclosed.

Date When the agreement was signed: The date of signing the contract and the location the agreement was signed should be identified. Furthermore, the parties must determine the area or geographical coverage according to which laws will be in force in the event of any dispute.

Definitions: The next clause is definitions, which is also known as a glossary in certain contracts. The definitions and terms employed to define the terms in the contract are specified in this clause.

Term: All contracts must clearly define the duration of the contract. It should also state when the contract commences and the date it will expire. This clause is essential since it clarifies when the agreement will become valid.

Payment: Determining the amount to be paid is a little more complex since it involves negotiations over various factors. First, you must determine the service’s cost and whether any taxes will be added. After that, if the payment is made in installments or as a lump sum, a payment schedule must be formulated. Also, it would be best if you decided on the penalty in case of late payment.

Responsibilities: A provision that clarifies the obligations and responsibilities of each of the parties of the agreement is among the essential terms in a contract to include. This clause demands care and attention to detail. It will be specific to the type of services to be delivered. Even if you’ve previously discussed the service to be provided with the other side, it is essential to define the obligations clearly on the document.

Confidentiality: A confidentiality provision safeguards trade secrets and any private information obtained during the duration of the contract and beyond. Web developers, consultants, and various other service providers usually utilize this clause to protect confidential information from being accessed by their competitors. For instance, an expert who has created a specific procedure to streamline workflow may utilize a confidentiality clause in order to stop clients from sharing this information with a different consultant. Additionally, the parties can also include a non-compete provision.

Dispute Resolution: In the case of a dispute, the clause that outlines which way the issue will be resolved and the law that will be used must be stated. Most often, the parties remain close to their home. The most popular method of dispute resolution is mediation, arbitration, and recourse to traditional courts of common law. Some contracts have the “Choice of Law” or “Prevailing Law” provision, which states that the rules of the specific state, county, or even municipality will determine the outcome of the dispute.

Termination: In some cases where the damages and defaults are of such a serious nature that they will seriously alter the worth of the product. In these circumstances, a clause to terminate the contract allows either party to end the contract by giving a specific time frame. In addition, it provides every party with the option to end the contract at any time and for any reason, with a written notice, typically 30-60 days.

Force Majeure clause: The clause of force majeure should be included in contracts to avoid the liability of natural and unavoidable events that disrupt the planned sequence of events and hinder the parties from performing their duties.

Modifications or amendments: Sometimes, a need to amend or change certain provisions in the agreement occurs. The clause for revision or modification allows for a simpler determination of how modifications should be done. It also assists in preventing disputes at a later date between the parties arising from any changes made to the contract.

Signatures: Service agreements must always be signed and dated by both parties involved. It is a good idea to have the signatures notarized in order to stop anyone from later claiming that they did not sign the contract. It is important to ensure that each party has the agreement in writing that they can refer to throughout the term of the agreement.

Conclusion

Parties entering into an agreement is a typical business situation; however, ensuring that there are comprehensive clauses for service is essential. Always be aware of the most important terms to include in a service agreement prior to writing or signing one.