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A service agreement or supply contracts are a common types of agreements. They can cover a wide range of commercial relationships and typically cover a relationship where a business provides its services to a customer. For example, you may see these types of agreements used in situations involving a:

  • tutor providing tutoring to a student; 
  • matchmaker assisting someone in finding a romantic partner; 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 the terms, conditions, rights and obligations of each party. This article will explain what you need to know about service agreements.

Title

A service agreement may not necessarily always be titled ‘service agreement’. These agreements can have various names depending on the circumstances, such as a: 

  • client agreement;
  • consultancy agreement; or
  • terms and conditions. 

Despite the name of the agreement, these agreements will mostly be largely similar and will 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 the customer. It will include information such as:

  • parties: the names and contact details for the parties. Also, if applicable, the company’s Australian Business Number (ABN) or Australian Company Number (ACN);
  • term: how long the parties want the agreement to last for and whether there is an option for the agreement to automatically renew or at the option of one party;
  • services: what services are being provided under the agreement so that the parties are clear on what to expect. Also, if applicable, what services are excluded; and
  • price and payment terms: the price for the services and how that price should be paid.

If you plan to have your customers sign your service agreement, you should include signature blocks on the execution page. Depending on whether an individual or company is signing the agreement, that signature block can be updated. 

Instead of a schedule, some businesses will use their quote or proposal to set out the commercial terms of the agreement. However, you should include all of the parts above.

Terms and Conditions

Following the schedule and signature blocks will be the terms and conditions for the agreement. Those terms can contain a variety of provisions depending on the nature of the services provided and the relationship between the parties. Of all the standard clauses that you might expect to find in a service agreement, the following are ones that you should carefully consider when preparing such an agreement:

1. Payment

In conjunction with the details included in the schedule, the terms should clearly outline what happens if a customer fails to pay any money owing in relation to the agreement.

2. Termination

If the parties would like a right to terminate the agreement before it expires, this clause should clearly state in what circumstances a party can terminate the agreement and how. For example, 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. This will often be a clause that parties will negotiate so that their rights are balanced. 

3. Intellectual property

If any party is providing their intellectual property to another party for them to use, a detailed provision regarding intellectual property is critical. These clauses will outline whether intellectual property will transfer between the parties or if a licence is being granted to the other party to use the intellectual property.

4. Exclusions and Limitations of Liability and Indemnities

Frequently, service agreements will contain clauses that either exclude or limit the service provider’s liability. Additionally, they may request that the customer compensate (or indemnify) the service provider for any loss they may suffer in connection with the agreement. As a customer, you should always carefully review any clauses that limit or exclude a service provider’s liability or where you are required to compensate them. This is because such clauses can have significant financial consequences if relied upon.

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, or expect to be providing, services to a consumer in New South Wales, you should make sure that you clearly identify those terms at the beginning of your terms and conditions.

Key Takeaways

Service agreements and supply contracts can cover a wide range of commercial relationships. However, they typically cover a relationship where a business provides its services to a customer. There is a lot to consider when preparing a service agreement. Therefore, it is always best to consider getting legal advice or having a contract lawyer help you prepare or review the agreement.  If you need assistance with your service agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is a service agreement?

It is a legally binding contract outlining the terms, conditions, rights and obligations of each party to the contract. They usually cover a relationship where a business provides its services to a customer.

What standard clauses should I include in a service agreement?

Key clauses in a service agreement include a payment clause, termination clause and intellectual property clause. You should also include a clause covering exclusions and limitations of liability.

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