{"id":1676,"date":"2020-12-18T06:02:50","date_gmt":"2020-12-18T06:02:50","guid":{"rendered":"https:\/\/nz.legalvision.com.au\/?p=1676"},"modified":"2026-02-25T12:30:16","modified_gmt":"2026-02-24T23:30:16","slug":"key-terms-to-review-in-a-service-agreement","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/commercial-contracts\/key-terms-to-review-in-a-service-agreement\/","title":{"rendered":"Key Terms to Review in a Service Agreement in NZ"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">A service agreement is a <a href=\"https:\/\/legalvision.co.nz\/commercial-contracts\/legally-binding-agreement-new-zealand\/\">legally binding contract<\/a> between a service provider and its client. As a service provider, you may find it difficult to know what terms you should include in such an agreement. Although each contract will vary depending on your client\u2019s needs, there are specific terms you should always include in your service agreements. This article will outline the nine key terms to review in your service agreement.<\/span><\/p>\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/12\/22115855\/cytonn-photography-GJao3ZTX9gU-unsplash-e1640129621597.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Commercial Contracts Checklist<\/div>\n            <div class=\"body-text\">\n                <p>To protect your business, ensure supplier contracts meet your business\u2019 needs. Our free Commercial Contracts Checklist will help.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/Commercial_Contracts_Guide_NZ.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">1. The Services<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">In your agreement, you should clearly articulate the type of service you will provide your client. Your description must be specific to your particular customer. This description should address the scope of your services and acknowledge the areas that are not covered.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It is also good practice to include measurable service standards where possible. For example, if you provide ongoing maintenance or support, you may specify expected response times, availability windows, or any limits on service frequency. You may also wish to include any assumptions that your service delivery relies on, for example, that a client must provide timely instructions, access to premises, or accurate information. Including these clarifications reduces the likelihood that you will be held responsible for delays or failures caused by your client\u2019s actions or omissions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">2. The Contract Term<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">This clause would include both the commencement and termination date of the service agreement.<\/span> Where relevant, you may specify whether the agreement automatically renews, whether it moves to a month-to-month arrangement, or whether a new contract must be signed.<\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n   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Payment<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">In exchange for your services, your clients must provide payment. The service agreement should clearly outline:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">the cost of your services;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">when your client is obliged to make this payment or payments;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the payment method. For example, through online payment, direct debit or a cheque; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">an acknowledgement of your right to cease providing services. For instance, due to a lack of payment.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">You may also wish to include provisions regarding late-payment interest or administrative recovery fees, provided these are reasonable estimation of loss and not punitive damages. Under New Zealand law, any such fees must reflect a genuine pre-estimate of loss or be commercially justifiable. You can also insert the right to suspend services if payment is delayed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">4. Engagement Clause<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">A key clause that your service agreement should include is an engagement provision. This clause outlines specific details concerning your employment. As a service provider, you can either be hired as an employee or an independent contractor.&nbsp;<\/span><\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Your service agreement must acknowledge what class of provider you are since the rights and duties differ between an employee and a contractor. For example, an employee is a part of that company or business, while a contractor is independent. This distinction means that employees are entitled to certain rights that are not available to contractors. As an employee, you are entitled to be a union member, receive sick leave, have paid parental leave, and have holiday pay.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">5. Indemnities Clause<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">An indemnities clause protects against any damage that results from the provision of your services. This provision will specify that any damage you cause is not the responsibility of your client. Such a disclosure aids in the continuance of the contractual relationship you have with your clients, and avoids entering into a dispute resolution process, should an accident or mistake occur.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Where appropriate, you may limit indemnities so they only apply to losses caused by your negligence or wilful misconduct, rather than all possible loss. New Zealand courts tend to interpret broad indemnity clauses strictly, so clear drafting is crucial. You may also include an obligation for the client to mitigate any loss, also known as a proportionate reduction if liability clause.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">6. Liability<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">It is best practice to include a liability provision in your service agreement. This clause will acknowledge the extent of your liability for any issues that arise during the provision of services. This may include a restriction on the amount that your client can claim in legal proceedings. You should also acknowledge the circumstances in which you are liable for damage caused, such as through an indemnities clause.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Before entering into a service agreement with a client, it is useful to evaluate the extent of the obligations you wish to take on, and areas where you or your client require protection.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You may cap your liability to the total amount paid under the contract or another reasonable sum. However, in New Zealand you cannot contract out of liability for misleading or deceptive conduct when dealing with consumers. In business-to-business contracts, you may contract out of certain parts of the <em>Fair Trading Act 1986<\/em>, but only if this is fair and reasonable. It is also common to exclude liability for consequential or indirect loss, though you should define these terms clearly to avoid ambiguity.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">7. Amendment of the Agreement<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">After you and your client have entered into the service agreement, you may wish to <a href=\"https:\/\/legalvision.co.nz\/commercial-contracts\/how-to-change-or-amend-a-business-contract-in-new-zealand\/\">change a contract term<\/a>.&nbsp;It is useful to specify how terms and obligations in the service agreement should be changed or varied. You may wish to include a \u2018no oral variation\u2019 clause. This term would mean that neither you nor your client could amend the agreement orally. Instead, all variations to the terms of the contract would have to be put into writing.&nbsp;<\/span><\/p>\n\n\n\n<div  class=\"box box--icon box--idea\">\n    <p>Including a variation procedure also protects both parties from claims that verbal promises form part of the agreement. This is particularly helpful in long-term service arrangements where requirements may change over time.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">8. Dispute Resolution<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">In the period that you are acting as a service provider for your client, issues may arise. Therefore, it is best to outline a procedure as to how you will resolve these disputes.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">A <a href=\"https:\/\/legalvision.co.nz\/disputes-and-litigation\/dispute-resolution-clause\/\">dispute resolution provision clause<\/a> should include;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">what a \u2018dispute\u2019 is;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">how you or your client can trigger this dispute resolution process. This may be through a written notice or conversation with your client; and&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the method of dispute resolution. For example, you may use mediation or arbitration.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">9. Termination<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">The service agreement should also address what is to occur should you or your client wish to <a href=\"https:\/\/legalvision.co.nz\/commercial-contracts\/terminate-business-contract-new-zealand\/\">terminate the contract<\/a>.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">A termination provision should include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">the grounds for termination. For example, your client may wish to cancel the entire agreement if you fail to carry out your services to the specified standard or disclose a piece of confidential information to a third party;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the termination protocol, such as the cancelling party providing the other with a written cancellation notice; and&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">what is to happen after contract termination occurs. <\/span><span style=\"font-weight: 400\">For example, your client may still need to make a final payment for the services provided after cancelling the contract.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">As a service provider, you must have a well-constructed service agreement in place with each of your clients. Although you should cater these agreements to each client, there are key terms that all service agreements should contain. These are:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">an outline of the services you will provide;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the term of the contract;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the payment mechanism;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">an engagement clause;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">an indemnities clause;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">a liability provision;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">protocol to vary or cancel the contract; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">a dispute resolution provision.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">If you wish to draft a service agreement, <\/span>LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced <a href=\"https:\/\/legalvision.co.nz\/contract-lawyers-lp\">contract lawyers<\/a> help businesses across industries manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision\u2019s legal membership, call <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or&nbsp;<a href=\"https:\/\/legalvision.co.nz\/membership\/\" target=\"_blank\" rel=\"noreferrer noopener\">visit our membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1606880228344\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is a service agreement?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A service agreement is a legally binding contract between you (as the service provider) and your client.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880258379\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What should be in a service agreement?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A service agreement should contain terms on: the services you will provide;<br \/>the length of time that you will provide these services; payment; engagement; indemnities; liability; the protocol to change or cancel the agreement; and dispute resolution.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880271477\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is the difference between a contract and a service agreement?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A service agreement is a type of contract that specifically relates to service providers, such as cleaners or gardeners.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606989773267\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is the purpose of a service contract?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A service contract creates and governs the legal relationship between you (as the service provider) and your clients.<\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>A service agreement is a legally binding contract between a service provider and its client. As a service provider, you may find it difficult to know what terms you should include in such an agreement. Although each contract will vary depending on your client\u2019s needs, there are specific terms you should always include in your<a href=\"https:\/\/legalvision.co.nz\/commercial-contracts\/key-terms-to-review-in-a-service-agreement\/\">Continue reading <span class=\"sr-only\">&#8220;Key Terms to Review in a Service Agreement in NZ&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13496,"featured_media":215505,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[3],"tags":[24,25,41,54,275,276],"class_list":["post-1676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-contracts","tag-startup","tag-small-business","tag-commercial-contracts","tag-medium-business","tag-services-business","tag-service-agreement"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Key Terms to Review in a Service Agreement | LegalVision New Zealand<\/title>\n<meta name=\"description\" content=\"Do you own or run a services business in New Zealand? 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