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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’s 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.

1. The Services

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.

2. The Contract Term

This clause would include both the commencement and termination date of the service agreement.

3. Payment

In exchange for your services, your clients must provide payment. The service agreement should clearly outline:

  • the cost of your services;
  • when your client is obliged to make this payment or payments;
  • the payment method. For example, through online payment, direct debit or a cheque; and
  • an acknowledgement of your right to cease providing services. For instance, due to a lack of payment. 

4. Engagement Clause

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. 

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, whilst 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.  

5. Indemnities Clause

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. 

6. Liability

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.

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. 

7. Amendment of the Agreement

After you and your client have entered into the service agreement, you may wish to change a contract term

It is useful to specify how terms and obligations in the service agreement should be changed or varied. You may wish to include a ‘no oral variation’ 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. 

8. Dispute Resolution

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. 

A dispute resolution provision clause should include;

  • what a ‘dispute’ is;
  • how you or your client can trigger this dispute resolution process. This may be through a written notice or conversation with your client; and 
  • the method of dispute resolution. For example, you may use mediation or arbitration. 

9. Termination

The service agreement should also address what is to occur should you or your client wish to terminate the contract

A termination provision should include:

  • 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; 
  • the termination protocol, such as the cancelling party providing the other with a written cancellation notice; and 
  • what is to happen after contract termination occurs. For example, your client may still need to make a final payment for the services provided after cancelling the contract.

Key Takeaways

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:

  • an outline of the services you will provide; 
  • the term of the contract; 
  • the payment mechanism; 
  • an engagement clause;
  • an indemnities clause;
  • a liability provision; 
  • protocol to vary or cancel the contract; and
  • a dispute resolution provision. 

If you wish to draft a service agreement, contact LegalVision’s contract lawyers on 0800 005 570 or complete the form on this page. 

FAQs

What is a service agreement?

A service agreement is a legally binding contract between you (as the service provider) and your client.

What should be in a service agreement?

A service agreement should contain terms on: the services you will provide;
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.

What is the difference between a contract and a service agreement?

A service agreement is a type of contract that specifically relates to service providers, such as cleaners or gardeners.

What is the purpose of a service contract?

A service contract creates and governs the legal relationship between you (as the service provider) and your clients.

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