If you run an IT business, you should have an IT services agreement. An IT services agreement protects your interests and manages your relationship with customers. It is essential that the agreement is comprehensive and covers all of the relevant details. This article sets out the issues you should consider and the terms you should include in your IT services agreement.

Scope of Work

You need to ensure that your IT services agreement details the services you will be providing and how you will be carrying out these services. You should also include an agreed timeline for completion. For example, you may be building or installing hardware or providing managed services. You should therefore let your customers know that these services may take a few months to complete.

You may include other terms in an IT services agreement, such as:

  • a progress update clause, which requires you to update your customer regarding the progress of your work. For example, you may decide to provide your customer with an update every fortnight; or
  • an acceptance testing clause, which requires you to show your product has been tested for errors and compliance with the agreed documented specifications.

Payment

Your IT services agreement should cover how and when you will be paid. For example, will you require payment upfront or will you invoice customers upon reaching certain milestones? What happens if the customer wants continued technical support and maintenance after installation? You should answer these questions in your IT services agreement to avoid confusion later on. 

Intellectual Property

If you are building or developing new software or hardware for the customer, you should ensure that your IT services agreement covers intellectual property (IP) ownership.

Ask yourself: who will own the rights to any new products you build? If the customer is assigned the rights, you can negotiate a licence to use the products for marketing purposes. You should also obtain a licence to use any existing information or software owned by a customer you are providing your services to. 

Customer Responsibilities

An IT services agreement should also include what you expect from the customer regarding:

  • access;
  • materials;
  • data;
  • information;
  • assumptions; and
  • dependencies.

If you are providing services to a medium business or enterprise, you should appoint a single point of contact for each customer. This will make the process more efficient and assist in the completion of work.

You should also reserve the right to amend the timeline of any deliverables if the customer fails to meet their responsibilities under the agreement. Your ability to reach your deliverable milestones may be affected by the customer’s failure to provide necessary data or materials.

Suspension and Termination

When dealing with customers, there is always the risk of disagreements. Your IT services agreement should detail your rights in relation to the suspension of your services or the termination of your agreement with customers. For example, you may decide to suspend your services because of overdue payments or terminate the agreement for breach or non-cooperation. Make sure the agreement states what you can do in these circumstances to ensure you can enforce your legal rights.

Liabilities

You should set out the limits of your liability if something goes wrong. For example, will you be liable if the customer hires a third party to provide services which affect the operation of the deliverables? What if there are faults with third-party products which the customer specifically requested you install? Are you liable for any third party errors? These questions are important to consider when drafting your IT services agreement to protect yourself in the event something goes wrong. 

Dispute Resolution

Having an agreed procedure for resolving disputes is always a good idea. As a business, you should aim to resolve disputes quickly and in good faith. If you require further dispute resolution, you should avoid paying unnecessary legal costs by trying alternative dispute resolution (ADR) processes. The most common ADR process is mediation, which encourages parties to reach an agreement between themselves. 

Key Takeaways

As an IT business, there are a number of terms you should include in your IT services agreement. You should consider:

  • scope of work;
  • payment;
  • customer responsibilities;
  • IP;
  • suspension and termination;
  • liabilities; and
  • dispute resolution.

These are important if you want to protect your business interests and maintain a good relationship with your customers. If you have questions or need help drafting an IT services agreement, contact LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

Justin Ocsan
If you would like further information on any of the topics mentioned in this article, please get in touch using the form on this page.
Would you like to get in touch with Justin about this topic, or ask us any other question? Please fill out the form below to send Justin a message!