Service agreements are an important part of business. Often, they are considered from a purchaser’s perspective. But service agreements are just as important for service providers. A well-drafted service agreement will ensure that both parties in a service relationship receive fair treatment. So, what is the trick to drafting a strong and reliable service agreement? Generally speaking, there are many tricks. Service agreements needn’t be overly complicated, but they can still be complex. In this guide, we’ll take a look at some of the features that distinguish the more effective service agreements, from their counterparts. Hopefully, that will help answer the question: do you need a service agreement between you and your consumers?
Before we go any further, though, let’s break down the purpose of service agreements. As a service provider, your business model is based on an exchange. Your company provides services to clients and customers, in exchange for payment. A service agreement is designed to ensure that the exchange between you and your consumers remains fair. In that sense, service agreements can be collaborative; when you draft one, it’s important to think of your clients’ needs as well. After all, satisfied clients are the key to a successful business. But that doesn’t mean your needs have to take a back seat. It is important that your service agreement is firm in setting boundaries where necessary. Service relationships often change, so agreements need to be dynamic. But they also need to ensure that your business has some assurance of stability, going forward.
What are some common provisions found in most service agreements?
A service agreement needs to have certain provisions. The precise nature of those provisions will vary, depending on the services your company offers. For that reason, it’s difficult to offer a one-size-fits-all agreement template. However, if you were to look at a broad spectrum of service agreements, you may notice that some provisions appear quite frequently, albeit with various alterations. Essentially, the more common service agreement provisions form a backbone of sorts. With them, you can find a broad structure for your service agreement. So, let’s take a look at some of the most common service agreement provisions.
Your service agreement needs a description of services – here’s why
A description of services often appears early in a service agreement. It may seem a little pedantic, too; surely both parties are clear on the services being offered? Often, yes – but there’s more to it than that. Describing the services you offer places parameters around the service relationship. Like any relationship, service relationships are robust. They can change, and often do. By agreeing on the services you will offer, you can create clearer expectations in your service relationship. Sometimes, that can be useful in situations where your client requires additional services at short notice. It might also be useful if expectations arise in terms of value-add services, or other commercial incentives. With clearly defined, and agreed parameters, your service relationship stands a better chance of staying fair.
Standard of performance: your service agreement should set the standard
Fairness goes both ways, of course. Your client is entitled to a satisfactory standard of service. Further still, your client is likely to want some assurance that they will receive a certain standard of service. That’s why a lot of service agreements include a standard of performance clause. As its name suggests, this clause establishes the standard by which your services must be carried out. A common standard imposed under service agreements is that of ‘reasonable care and skill.’ That standard is adopted from the field of negligence law, in which a duty of care is imposed on the same terms. However, standard of service provisions can also be implied. That means your service agreement may bind you to a standard of service, even without an explicit provision to that end.
However, some service agreements go further. Sometimes, customers seeking premium services may want a higher standard. In such cases, a service agreement can respond by imposing stricter terms. A clause similar to the following may be helpful: ‘a standard of skill, care and diligence to be expected from a qualified, competent and experienced provider of services of a similar scope and complexity.’ That’s just an example, but provisions like that can be useful – especially for specialised services. Before adopting one, though, it’s best to seek some professional advice.
Costing and charging: make sure your service agreement covers you!
Another important provision in a service agreement is one concerning costing and charging. These provisions are another example of the double-sided protection service agreements offer. On the one hand, a costing and charging provision will help you manage the terms of your payment. They can help you get paid the right amount, in a timely manner. On the other hand, such provisions help your clients. They offer them some degree of certainty as to the price of your services, and the terms of payment. If well-constructed, these provisions can lay the foundation for a fulfilling and straightforward service relationship between you and your clients.
Service agreements need to cover a lot of topics – here’s how to pick yours
Service agreements need to traverse a wide range of topics, from commencing a service relationship, to terminating one. And everything in between! As a result, you may be faced with the question of which provisions to include. For a lot of business, that can be a challenging question to answer. It can also be complicated for those who are starting a business, and have yet to gain a great deal of experience.
In those cases, the best place to start is at the start. We suggest carefully thinking through your business model. What services do you offer; how much do they cost? What will your clients be expecting? Simple questions like that can help you build a general framework around your services. Ultimately, service agreements are important when it comes to managing expectations, setting standards, and maintain fair and amiable service relationships. For that reason, it’s worth taking the time to draft a strong one.
Get professional help to obtain a fair and enforceable service agreement
Service agreements are complex; they’re a legal document. For that reason, we recommend getting some legal help to put yours together. At Kafrouni Lawyers, we have longstanding and wide-ranging experience with service agreements. We have drafted them for many different businesses, in relation to many different services. We can help you draft a service agreement that will contribute to a fair relationship between you and your consumers.
The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Company directors should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.
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