As a service provider, you must have a solid agreement to protect your commercial interests. A service agreement is an agreement made between two parties. Accordingly, it documents the agreement between them concerning the performance of the services by one party, known as the service provider, to the other, known as the principal. Service agreements are very common and can be used in various circumstances, such as tutoring relationships, migration agencies and disability carers. They set out the fundamental terms of the relationship between the principal and the service provider. This article will explore six key terms you should include in your service agreement.
1. Fees and Expenses
In a typical service agreement, the service provider provides a service or services to the principal for a fee. The service provider may also be reimbursed for pre-agreed out-of-pocket expenses, in addition to the fee. Therefore, you should specify these amounts, and any limits and exclusions that may apply, to avoid confusion. You may also include a calculation method and example.
2. Nature of the Services
If you are the service provider, this gives you certainty about the work you will do and any associated costs. Likewise, the principal may easily examine the agreement in the event the service provider does not provide the service they requested. In addition, you should agree on whether further services may be provided and if so, the process you intend to use to deal with this.
Continue reading this article below the form3. Term of Service Agreement
There are different ways to set out the duration of the services. For example, these options include:
- providing a one-off service for a set fee;
- the service provider providing their services for a predetermined length of time for a fee; or
- the service provider providing their services on an ongoing basis for a fee.
4. Rights, Responsibilities and Obligations
You can choose how detailed you want your service agreement to be. Accordingly, a service agreement can be prescriptive and specify the rights, responsibilities and obligations of the parties or it can provide flexibility.
In particular, in a service agreement, it is important to confirm whether the service provider can subcontract the services to a third-party. This is important to maintain the quality of services for the principal, as well as protect the service provider’s business. For example, if the third-party provider were to make an error in service delivery, the service provider may be liable for this error. You will want to decide whether you allow subcontractors and if you do, under what circumstances.
5. Confidentiality and Privacy
If the service provider has access to the principal’s confidential information, you must include confidentiality and privacy obligations. This is particularly important if confidentiality is an issue or priority for your business.
6. Insurance, Tax and Super
You must specify the insurance, taxation and superannuation obligations of the parties. Generally, each party should be responsible for their own obligations at their own cost.
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Key Takeaways
It is highly recommended that parties agree on and document the terms and conditions of their relationship in a service agreement before the service provider starts to provide the services. On the whole, this will greatly minimise the risk of disputes down the track.
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Frequently Asked Questions
You should pay special attention to the specifics of your responsibilities as a service provider or principal and the dispute resolution process.
A service agreement establishes the relationship you will have with a service provider for fixed or rolling terms. A master services agreement sets a framework for multiple dealings with the same person. It allows you to set out all the important legal terms in one agreement, then submit a much simpler document e.g an order, each time you work together.
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