What is a Service Agreement?
A Service Agreement is a contract between a service provider (seller) and a client (buyer) where seller agrees to provider specific services to buyer for a fee. It typically defines scope of work, duration for completion of service, payment terms and mechanism for dispute resolution.
When to use Service Agreement?
A Service Agreement could be used by any individual or business who provide any services such as consulting, personal coaching, professional services, plumbing, painting, electrical, cleaning, building etc. It might also be called a Service Level Agreement, Consulting Service Agreement or General Service Contract.
Why should you use Service Agreement?
By forcing buyer and seller to discuss the keys elements of the arrangements beforehand, Service Agreement prevents many disputes regarding quality of services, time frame or payments that may arise at a later stage. By detailing a well-defined dispute resolution process, this agreement simplifies the process of resolving disputes, in case there is any.
If you are a service provider (or a client for services) and are not using a Service Agreement, you should consider the benefits of using it. A verbal agreement or a handshake might appear to expedite your project but it leaves out many crucial details, leaving doors open for disputes later on. For example, at what stage payment is due, who will pay for transportation of materials or when a service is supposed to be delivered. If you don’t address these issues upfront, you may be heading towards costly legal disputes in case there is any disagreement between quality of service, time frame or payments.
Contractor or Employee?
If you intend to use Service Agreement, you should understand the difference between a contractor and an employee. The Service Agreement template attached below allows you to be hired as a contractor and is very different from an Employee Contract, which allows you to be hired as an employee.
There are many factors that a court look at while deciding whether you are a contractor or an employee:
- Whether you can subcontract / delegate the work
- Whether you provide your own equipment or tools required for delivering the service
- Whether you are paid based on time that you’ve worked, or based on a quotation for work (for example, servicing a car or painting a building)
- How much control you have – can you chose your own work hours or place of work – and how much control buyer has on how the work is performed
- Who is responsible in case something goes wrong – whether you need to rectify mistakes at your own costs or whether buyer is responsible and would suffer loss.
A buyer can’t treat an employee as a contractor as that would amount to neglecting various employment obligations such as superannuation or employee benefits and would lead to significant penalties.
What if a contract is broken?
Sometime things don’t work out. If you are a client, you may not be happy with the quality of service being delivered or frequent deadline misses. On the other hand, if you are a service provider, you may have to bear extra costs because of frequent changes being asked by the client.
We’ve included a Service Agreement template that you can use to amend or terminate the contract. But that can happen only if you and the other party have signed the contract in the first place. Signing this service contract will help you keep a clear record of your agreements and avoid misunderstandings. In case things go wrong, you can take a legal course of action with a signed contract in hand.
How to use Service Agreement?
The Service Agreement template attached below can be customized for an on-going project or a one-off project. In either case, by providing more details about the service arrangement, you are more likely to prevent any disputes later on. Here are some of the key details that you should consider providing:
- Scope of work to be performed
- Criteria to determine whether the work is completed
- Time frame for completion of work
- Payment terms and schedule of payment release – is it hourly, flat fee or project based? Is there any budget? Is there any penalty for late payment?
- What will happen is the agreement is terminated
- How to resolve disputes
- Address necessary legal terms such as non-compete, non-solicitation and confidentiality, as appropriate
- Who owns the creating product for services such as software development
The Service Agreement is legally binding when it is signed by both you and the client and is dated. Both the parties should keep signed copies.
Service Agreement Template
This Service Agreement (this “Agreement”) is made and entered into this _____ day of ________, 20__, by and between:
The Service Provider (the “Service Provider”):
of the following address:
and the Client (the “Client”):
of the following address:
The Client requires the services (the “Services”) to be provided, as described in this Agreement, and wishes to hire an independent contractor to provide the Services to the Client.
The Service Provider has the required qualifications, skills and experience to provide the Services and agrees to provide the Services to the Client on the terms and conditions set out in this Agreement.
IN CONSIDERATION OF the matter described above and of the mutual benefits and obligations contained hereinafter, the sufficiency and adequacy is hereby acknowledged, intending to be legally bound, the Service Provider and the Client (individually the “Party” and collectively the “Parties” to this Agreement) agree as follows:
1. SCOPE OF WORK
The Service Provider hereby agrees to provide the Client with the following services (the “Services”):
- [describe the services that would be provided]
- [describe the services that would be provided]
The Services will also include any other tasks that the Parties may agree on.
The Service Provider will provide the Services at the following location (the “Location”):
[Mention the address of place where the Services will be provided]
3. TERM AND TERMINATION
The term of this Agreement shall commence on __________(the “Effective Date”) and shall continue in full force and effect until the completion of the Services, unless either party serves 30 day written notice on the other of its desire to terminate this Agreement.
The Term of this Agreement may be extended by the written consent from both the Parties.
The Client agrees to pay the Service Provider a flat fee of $______________ for the Services rendered (the “Compensation”). The Compensation will be paid when the Services are completed. The Compensation does not include sales tax or other applicable fees, tariffs and duties as applicable by the law.
In the event that this Agreement is terminated by the Client prior to the completion of the Services and the Services have been partially rendered and there is no breach of this Agreement on the part of the Service Provider, the Service Provider will be entitled to charge a pro rata payment of the Compensation.
The Service Provider is permitted to charge from time to time reasonable and necessary expenses in connection with providing the Services, subject to approval from the Client.
The Client will make the payment for the Compensation using the following form of payment: [mention mode of payment – for example back account details]
5. INDEPENDENT CONTRACTOR
The Parties hereby acknowledge and agree that this Agreement is for the sole and express purpose of delivering the Services under the terms and conditions herein and that nothing in this agreement shall be deemed to constitute a partnership, joint venture, agency relationship or otherwise between the Parties and that the Service Provider is acting as an independent contractor, not as an employee.
Each party (in such capacity, the “Receiving Party”) acknowledges and agrees to maintain the confidentiality of Confidential Information (as hereafter defined) provided by the other party (in such capacity, the “Disclosing Party”) hereunder or under the Agreement.
Confidential information (the “Confidential Information”) refers to any information which is not in the public domain and commercially valuable to either of the Parties.
Both Parties hereby agree that they shall: (i) not disclose Confidential Information to any third parties throughout the duration of this Agreement and for a period of 3 (three) year following the termination of this Agreement, and (ii) Not use the Confidential Information for any purpose except those detailed herein or expressly authorised by the Disclosing Party.
7. LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOSS OF PROFIT), EXEMPLARY OR PUNITIVE DAMAGES WHETHER IN CONTRACT, TORT OR OTHER THEORIES OF LAW, EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THE TOTAL CUMULATIVE LIABILITY OF CUSTOMER ARISING FROM OR RELATING TO THIS AGREEMENT SHALL NOT EXCEED THE TOTAL AMOUNT PAYABLE TO SERVICE PROVIDER UNDER THE AGREEMENT THAT GIVES RISE TO SUCH LIABILITY; PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY TO ANY LIABILITY FOR DAMAGES ARISING FROM (A) WILLFUL MISCONDUCT OR (B) BREACH OF CONFIDENTIALITY OBLIGATIONS OR (B) LIABILITY FOR INFRINGEMENT CLAIMS.
8. INTELLECTUAL PROPERTY
During the deliver of the Services as per the terms and conditions of this Agreement, The Service Provider may create certain intellectual property (the “Intellectual Property”) that may include plans, designs, drawings, specifications, forecasts, analyses, evaluations, source code, artwork or any other intellectual property as required to deliver the Services to the Client. Unless the Parties otherwise agree, any such Intellectual Property created by the Service Provider during the course of providing the Service will belong to the Client.
During the Term of this Agreement and for a period of 1 (one) year following the termination of this Agreement, the Service Provider, as well as their employees, agents, and/or representative, agree to refrain from engaging, directly or indirectly, in any form of competition including, but not limited to, through marketing, consulting, advisory, investment or financial activities with the Client.
To the extent permitted by the law and paid in settlement from any applicable insurance policies, each Party agrees to indemnify and hold harmless the other party, as well as their employees, agents, and/or representative, any and all claims, damages, losses, penalties, expenses, reasonable legal fee and costs of any kind or amount whatsoever which results from any act or omission of the indemnifying party that occurs in connection with this Agreement. This indemnification will survive the termination of this Agreement.
11. TIME FOR PERFORMANCE
Time is of the essence for the performance by the Service Provider under this Agreement. Any default of any date or time specified in this Agreement shall be in breach of this Agreement.
12. GENERAL PROVISIONS
a. DISPUTE RESOLUTION AND GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws of the State of ____________, without giving effect to its principles governing conflicts of law.
b. ENTIRE AGREEMENT
This Agreement set forth the entire understanding of the parties with respect to the subject matter hereof and thereof. This Agreement supersedes all prior or simultaneous representations, discussions, negotiations, letters, proposals, agreements and understandings between the parties hereto with respect to the subject matter hereof, whether written or oral.
This Agreement may be amended, modified or supplemented only by a written instrument duly executed by an authorized representative of each of the parties.
Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
All notices provided for or permitted under this Agreement shall be deemed effective upon receipt, and shall be in writing and delivered to the Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
Name of the Client
Signature of the Client
Name of the Service Provider
Signature of the Service Provider
Do you need help with drafting or reviewing Service Agreement?
Are you service provider (or a service buyer) and looking to tighten your Service Agreement to cover all aspects of confidentiality, intellectual property, scope of work and dispute resolution?
We can help you draft or review your existing Service Agreement, while ensuring you are protected and get peace of mind.
Click here to reach-out to us.