In Short
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A service agreement is a legal contract setting out who will do what, at what price, and for how long, including details like payment, termination, intellectual property and liability.
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It should include a schedule with the parties’ details, scope of services, price and payment terms, plus any exclusions.
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The agreement must comply with Australian Consumer Law, ensuring terms are fair and consumer guarantees are not excluded.
Tips for Businesses
Use a clear schedule at the start so both parties know the obligations, timing and cost. Ensure clauses on termination and intellectual property are specific to avoid disputes. Always review your terms to confirm they are fair and compliant with consumer law.
If you are a service provider, you should have a service agreement or a supply contract that covers the services you are providing. A service agreement can encompass a wide range of commercial relationships, including business-to-business and business-to-customer arrangements. For example, you may see a service agreement used in situations involving a:
- tutor providing tutoring to a student;
- consultant providing consultancy services in their area of expertise;
- marketing agency providing marketing services to a client; or
- migration agency assisting a migrant obtain their visa to work and live in Australia.
A service agreement is a legally binding contract that outlines each party’s terms, conditions, rights, and obligations. This article will explain its fundamental features.
Title
A service agreement may not necessarily always be called a ‘service agreement’. These agreements can have various names depending on the circumstances, such as:
- client agreement;
- consultancy agreement; or
- terms and conditions.
Despite the name of the agreement, these contracts will be similar and contain common types of terms and provisions.
Schedule
At the beginning of the service agreement, you should include a schedule so that the parties can set out the commercial details of the agreement. You can update that schedule depending on your customer. It will include information such as:
- parties: the names and contact details for the parties, including, where applicable, each party’s Australian Business Number (ABN) or Australian Company Number (ACN);
- term: the term sets out how long the parties want the agreement to last and whether parties can renew the agreement by mutual agreement or automatically;
- services: what services one party is providing the other under the agreement so everyone is clear on what to expect. This may also include, if applicable, what services are excluded; and
- price and payment terms: the price for the services and how and when payment is due.
Where you intend to have the other party sign your service agreement (as opposed to having a clickwrap or browsewrap option), you should include signature blocks on the execution page. It is crucial to update the signature block based on the other party’s nature, whether an individual or a company, to ensure the proper execution of the service agreement.
Continue reading this article below the formTerms and Conditions
The terms and conditions of your service agreement will form the bulk of your service agreement. These terms can contain a variety of provisions depending on the nature of the services you provide and the relationship between your clients. These terms and conditions typically remain the same for each customer or business you supply your services to. The following section unpacks essential clauses you should pay special attention to when preparing your service agreement.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
1. Payment
The payment clause should detail what happens if a customer fails to make the required payments under the agreement. It may also incorporate or refer to the price and payment terms you outline in the schedule.
2. Termination
Parties should clearly know their options if they wish to exit the service agreement before it expires. A termination clause should clearly state the circumstances in which a party can terminate the agreement. For example, both parties may want to be able to terminate the agreement at any time, so long as they provide written notice to the other party before they do so. A termination clause should also set out what happens to the provision of services and any paid or unpaid amounts where the agreement is terminated.
3. Intellectual property
If any party is providing their intellectual property to another party to use, a detailed provision regarding intellectual property is critical. These clauses will specify whether intellectual property transfers between the parties. They may also instead indicate if a license is granted for the other party to use the intellectual property. If you are creating new intellectual property under this service agreement, the intellectual property clause should specify its ownership.
4. Exclusions and Limitations of Liability and Indemnities
Frequently, service agreements will contain clauses that either exclude or limit the service provider’s liability. Accordingly, such clauses may request compensation (or indemnification) from the customer. As a service provider, you may consider implementing this to cover any loss you may experience in connection with the agreement.
Additionally, your terms and conditions may contain substantially prejudicial terms, such as clauses that limit or exclude your liability. If this is the case and you are providing services to a consumer in New South Wales, or expect to do so, ensure that you clearly identify those terms. Ensure that you place this at the beginning of your terms and conditions.
Australian Consumer Law Considerations
Depending on the type of services you provide, your services and service agreement may be subject to the Australian Consumer Law. There are two essential aspects to consider here.
Firstly, as a service supplier, you cannot contract out of or attempt to limit any consumer guarantees you owe to consumers.
Secondly, your service agreement cannot include any unfair contract terms. An unfair contract term causes a significant imbalance in the rights and obligations of the parties and is not reasonably necessary to protect the business’ legitimate interests. Furthermore, it causes detriment to one party if the other party seeks to rely on it.
Key Takeaways
As a service provider, it is crucial to have an agreement setting out the services you provide. This agreement should contain clear terms around payment, termination, intellectual property and liability.
If you need help drafting or reviewing your service agreements, our experienced contract lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A service agreement sets out the key terms of a business relationship, including the scope of services, payment, timelines and responsibilities. It helps prevent disputes by making obligations clear.
While you can draft your own, a lawyer can ensure your agreement covers essential clauses, avoids unfair terms, and complies with Australian Consumer Law. This reduces the risk of costly disputes later.
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