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Services Agreements and Services Level Agreements
Services agreements should include certain basic terms which are highlighted below.
Services
It is important to clearly define the services to be performed
and any deadlines for work product or performance. Without
clarity, each party, even in good faith, may have different
ideas and not discover this until the work is completed and
one party is not satisfied. The more detail stated in the
contract about the relationship, the less risk of misunderstanding
or unfulfilled expectations later.
Service levels to be designated for technical or other performance
should be set forth in an exhibit to the agreement and stated
in detail; these some times also include financial penalties
or rewards. There is no set formula for determining these
levels and numbers.
Payment
The agreement should include a provision that states how
much is to be paid, when it is to be paid, what is included
in the payment (expenses, taxes, travel), procedures for invoicing,
and penalties for late payments. It's often a good plan for both sides to arrange payments after completion of milestones. That way the service provider hasn't done too much without payment and the client has paid too much prior to approving the work.
Relationship
The agreement should include a provision that clearly states
that the relationship is not a partnership, joint venture
or employer-employee. Since some of these relationships can
be implied by law, this is an important provision.
Confidential Information
The agreement should include a provision stating that the
parties will exchange confidential information, how that information
will be identified and handled, restrictions on disclosure
and misuse, and exceptions to what is included in confidential
information. Depending on whether the agreement is for provision
of services or hiring of a service provider, and the party
drafting the agreement, the exceptions may be more broad or
more narrow. This protects both the confidential information the service provider might offer and the information she might have access to when performing the work.
Ownership of Work Product
The service provider will want to make sure the agreement
does not include a provision stating that the customer owns
the work product, so that the Provider may continue to perform
similar services for other customers without the risk of legal
interference or restriction.
The hiring company will want to ensure
that they fully own the work product and that the agreement
contains the legal language as required by copyright law.
In either case, the owner of the work product, may agree
to give a license to the other party to address its needed
uses.
Representations and Warranties
These may include the following or other warranties:
- That the service provider will re-perform defective or
non-conforming services for a time period indicated
- That the services will be performed at or above industry
standards
- That the service provider will not infringe third party
rights in performing services
- That the service provider is not violating any other agreement
by performing services
Which warranties and the number included will depend on whether
the agreement is drafted by the service provider or hiring
company.
The service provider should be sure to include the correct
legal language, in the correct font size (no I'm not joking)
to waive the warranties implied by the Uniform Commercial
Code. Despite its name, the uniform commercial code varies
by state, but generally is uniform nonetheless. The UCC implied
warranties include a that the item will do what it is intended
to do, that it may be fit for a particular promise if so stated,
that it does not infringe third party rights and that the
seller has proper title to sell the item.
Indemnification
The hiring company should ensure that the agreement contains
a provision stating that the service provider will indemnify
the company for any breaches of the warranties. Indemnification
means that the provider will have to pay the company for any
third party litigation costs resulting from its breach of
the warranties.
Liability Limit
The service provider should include a provision limiting
its liability to the maximum amount it receives under the
agreement and for both direct and indirect damages. This wording
must be attorney drafted to be effective. Properly drafted,
this is an extremely beneficial provision to lower risk.
Termination and Term
The agreement should include a provision that regarding how
long the agreement will be in effect, and the options and
results for termination.
Insurance
The hiring company should require a minimum level of insurance
coverage from the service provider so that it can be sure
that any negligence or liabilities are financially covered. A contract is only as good as the assets backing it.
Force Majeure
The service provider should ensure inclusion of a force majeure
clause. Loosely translated from the French, this means a superior
force. A force majeure clause means that in the event of war,
acts of God, strikes, weather and other uncontrollable forces,
the parties are excused from performing.
Non-Solicitation
To protect both parties, the agreement should include a mutual
restriction on each party soliciting employment from the employees
of the other.
Conclusion
Services level agreements and service agreements help to
clarify goals and ensure a meeting of the minds, limit risk
and ensure both parties get what they want. You can find Sample Service Agreement Contracts, Free Service Agreement Forms, Sample Service Level Agreements, how to Write Service Level Agreements, free service level agreements, It Service Level Agreement Examples throughout the Internet. Both service agreements
and service level agreement legal forms by the author on this site.
Buy the Coollawyer Service Agreement or Coollawyer Contractor Agreement?
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1 Readers are cautioned not to rely
on this article as legal advice as it is
no substitution for a consultation with an attorney in your
state. Based
on jurisdiction and time, the law varies and changes.
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