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As a developer or IT services provider, you often start working for a client without a formal IT services agreement in place. You may have started on the work after quoting for a project and agreeing on the scope of work. While it makes sense to get started as soon as possible, without a services agreement in place you risk ending up in a sticky situation in the event of a dispute. That is because there is nothing to dictate how to resolve a dispute and you might subsequently end up in time-consuming exchanges. This article will explain the different ways that an IT services agreement can help solve disputes that your business might become involved in. 

Reduce the Chance of a Dispute Arising

An agreement helps parties deal with disputes when they arise, and often reduces the chances of a dispute arising in the first place. An agreement forces parties to clearly identify and articulate the scope of work and the time frames. When IT services are provided without a written agreement:

  • many important terms and conditions are ‘up for debate’;
  • parties may initially have different understandings of the services; and
  • it can lead to unmet expectations and, eventually, a dispute.

An IT services agreement covering terms and conditions of the legal relationship can significantly reduce the possibility of mismatched expectations. IT services and development projects are often sizable contracts, usually spanning 6–24 months. For service providers and developers, depending on the size of your business, a single contract can be a substantial portion of your income. Therefore, it is in your interest to ensure you don’t breach the contract.  

Agreements also cover aspects that you probably didn’t even think about regarding your legal relationship, like:

  • what happens when one or both parties want to change or vary the terms;
  • whether the developers can subcontract part of the work to other developers; and 
  • whether developers can address any usability issues with the website.

By addressing these points, an IT services agreement reduces the chance of a dispute arising when an unanticipated event occurs.

Save Time and Money

Without an IT services agreement, disputes about the terms and conditions of the contractual relationship may arise. It is unsurprising that these disputes often prove to be difficult, costly and time-consuming to resolve. If there is no written agreement, you will have to rely on phone calls and emails to gain an understanding of terms.

Parties may have discussed or agreed to “variations” verbally or through email correspondence. It is time-consuming for any third party to trawl through emails attempting to construct contractual terms and determine which party has not held up their part of the bargain. It is considerably more work to bring a lawyer up to speed before pursuing further action. And, if the matter is to go to court for resolution, the process is again a lengthier one.

A written agreement in place means that there are quantitative means to assess a party’s actions. If a party claims breach, the agreement and relevant clauses will come in handy as parties can use it in negotiations or before the court. It allows a third party to know the legal position and act accordingly.

Have a Clear Dispute Resolution Process

Without a written agreement, disputes can be painful because neither party knows how to manage and resolve the issue effectively. Often, parties start making all sorts of allegations and claims relating to the other party’s failure to meet important conditions of the agreement. This can go on for weeks or months without the parties being any closer to a resolution. And during this time, a development may often significantly slow down, or even grind to a halt. Clearly, this is in neither party’s interest.

An IT services agreement will have a “dispute resolution” clause. This clause prescribes the process for dealing with an issue. A typical example might require the parties to take one or more of the following steps when a dispute arises:

  1. notify the other party in writing that a dispute has arisen, noting particularly the breach of the specific clause or provision and outline what must be done to resolve the matter;
  2. provide the recipient party a period (two or three weeks) to respond to the dispute notice and engage in good faith negotiation to resolve the matter;
  3. refer the matter to mediation or binding arbitration for resolution through an appropriate body; and 
  4. commence proceedings in the appropriate court.

With an IT services agreement, both parties have agreed to follow a set-out process when a dispute arises. This can be immensely helpful and allows both parties to address any issues quickly and avoid a significant loss to their businesses. Simply knowing what to do when the other side appears to have defaulted on their obligations can save you tremendously.  

Key Takeaways

IT services are sizable investments for both parties involved. Because of this, it is extremely wise to ensure that you aren’t taking on more risk than you need to.

The first and most important step to minimise your risk is to put a written IT services agreement in place. This will reduce the chances of a dispute arising and help you manage a dispute if it does. If you have any questions or would like assistance drafting an IP services agreement, get in touch with one of LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

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