Negotiating and Drafting Effective Service Agreements

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Table of Contents

• Using Written Agreements
• Negotiation and Clear Contract Drafting
• Intellectual Property Clauses
• Confidentiality Clauses
• Dispute Resolution Clauses
• Key Takeaways

As a service professional, you regularly negotiate and draft service agreements before commencing work for any client. A well-drafted service agreement can make the difference between a successful, mutually beneficial job and a costly dispute between you and your client. This article will take you through some of how you can make your service agreements as effective as possible.

Using Written Agreements

In a dispute, it can be extremely valuable to refer to your service agreement so that you can see exactly what you and the client agreed to. Although it is possible to enter instead into a verbal agreement, doing so will not provide you with any record of the agreement. As a result, you leave yourself more susceptible to disputes if you are unclear on what the client expects from you. A written agreement also allows you to develop a more specific and comprehensive agreement with your client.

Negotiation and Clear Contract Drafting

Clarity is a crucial aspect of any service agreement. In the contract negotiation process, you should be as thorough and explicit as possible when discussing the terms of your agreement with the client. It is far easier to hash out contentious details before starting your working relationship than to settle a dispute later.

Similarly, you should draft the terms of your service agreement as clearly and precisely as possible. You should explicitly note matters such as pay, timeframes, and other specifics in your service agreement. Your service agreement should also precisely mention what your client can expect from you in terms of the work you will do for them. Specific drafting will ensure that you can easily refer back to what you and your client have agreed to, ensuring that you know exactly what you need to do and preventing disputes from arising.

Intellectual Property Clauses

The work you are doing for your client may involve you generating creative work for them, such as a logo, script or ad copy. If so, you should include a provision in your service agreement that discusses copyright ownership of the intellectual property created during your agreement. Typically, copyright in a creative work belongs to the author of the work. However, your client may not be well versed in copyright law and assume that they own the intellectual property for any creative work you produce for them. 

Similarly, if you are creating an innovative product or invention, you may need to include an intellectual property clause that covers in whose name the patent will be registered. An intellectual property clause that either assigns ownership of the intellectual property rights to the client or affirms your ownership can help you to avoid costly and time-wasting dispute resolution later on.  

Confidentiality Clauses

For service professionals such as lawyers, accountants or consultants, you may be involved in work that deals with sensitive information. In this case, you should include a confidentiality clause that clarifies to you and your client how you plan to deal with their information. By explaining how you will protect your client’s confidential information, you can ensure your client trusts you and maintains a successful business relationship. Further, a confidentiality clause will outline your obligations so that you can refer back to them if you are unclear about what information you can divulge to others and in what circumstances.  

Dispute Resolution Clauses

Depending on your services, it may be helpful to include a clause in your service agreement stipulating how you and your client will settle disputes. For example, you could include a clause that requires you and your client to undergo alternative dispute resolution (ADR) before you pursue litigation. Because means of dispute resolution like litigation can be costly and time-consuming, a clause that mandates that you pursue some other form of dispute resolution before litigation can take place will give you the chance to settle disputes flexibly, efficiently and cost-effectively.

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Key Takeaways

Clearly-drafted service agreements are essential to the smooth running of any service professional’s business. To ensure that your service agreement is effectively composed and you can improve client satisfaction, consider:

• putting the agreement in writing so you have a point of reference;
• negotiating terms and precisely drafting them to avoid ambiguity;
• implementing intellectual property clauses where relevant;
• using confidentiality clauses to build trust with your client; and
• drafting a dispute resolution clause.

If you need help drafting a clear and thorough service agreement, our contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.