Commercial Lawyer Special: 5 Steps to Write a Service Agreement

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Table of Contents

• 1. Identify the Services
• 2. Set Out the Payment Terms
• 3. Decide on a Start and End Date
• 4. Consider Each Party’s Responsibilities
• 5. Agree on How to Terminate
• Key Takeaways

A service agreement is an agreement between you i.e. the client and the service provider. If you are drafting a service agreement without the help of a commercial lawyer, there are 5 main steps that you can take to help avoid disputes between you and your service provider.

1. Identify the Services

A service agreement can be drafted for any service. It may be that you are looking to have a website or application developed, or you require household services such as cleaning, landscaping or nannying. Regardless of the services that you are receiving, the service agreement should clearly indicate what services will be provided to you. This will help avoid disputes in the future between you and the service provider.

2. Set Out the Payment Terms

One of the most common causes of disputes between clients and service providers is the payment of invoices. If it is a fixed fee service then the service agreement should indicate what the total fees are, when a deposit is to be made, and when the balance is expected to be paid in full. If the services are charged at an hourly rate, then the service agreement needs to be clear on when invoices will be made out to you and how many days you have to pay each invoice. Some service providers may also wish to reserve the right to charge you interest if invoices are not paid within the invoice terms.

3. Decide on a Start and End Date

For some services, a start and end date could be essential. For example, if you are launching a new application, you may require that the application be developed, tested and approved before a set launch date. The service agreement needs to have a clear start date, which could be the date on which the agreement is signed and, if necessary, an expected completion date. For development projects such as website or software development, you may need to attach a schedule that clearly sets out each phase of the development and the expected timeframe of each phase. Having a set time frame for the services provides both parties with a clear expectation of when the services are to be performed and completed.

4. Consider Each Party’s Responsibilities

If you are unsure of what the standard rights and responsibilities of a client and service provider are, you should seek the expertise of a commercial lawyer to ensure that both parties are being treated fairly under the contract. Generally, as a client, you are required to cooperate with the service provider to enable the service provider to provide their services. For example, if you are receiving accounting services, you are obliged to provide to the service provider, information that is, to the best of your knowledge, true, accurate and complete.

5. Agree on How to Terminate

In any relationship, there is the possibility of a breakdown. Once a relationship has broken down, it may be difficult for the parties to be able to discuss a proper procedure for terminating the contract. It is imperative that the service agreement has a well set out clause which details how the agreement can be terminated. You and the service provider may agree that the agreement can be terminated by providing the other with notice, and you may also want to reserve the right to terminate immediately in the event that there are any breaches or if it becomes clear that the service provider will not be able to meet agreed standards or deadlines. These terms are commercial decisions to be made between you and the service provider.

Key Takeaways

A service agreement is an important legal document to get right!

If you are not confident in drafting your own, you should consider seeking the assistance of a commercial lawyer. Usually, the client is not required to prepare the service agreement as the service provider should have a standard one that it tailors to each client. In that case, if you are uncomfortable with any of the terms, you should have it reviewed by a lawyer.  A good commercial lawyer will be able to ensure that you are being treated fairly under any agreement.