5 Crucial Elements of a Service Agreement

If you’re running a business, you may be aware that nothing that’s said through word-of-mouth or causally passed across is actually worth anything, because it can always be changed or manipulated. This is why everything needs to be put down on paper, to avoid any kind of confusion or disagreements due to misunderstandings that can arise in the future.

A service agreement does just this, by listing out exactly what your business is agreeing to offer to customers - this includes disclaimers and also lays out the specifics of what is agreeable and disagreeable to you - this includes stating if anything is illegal, such as copyrighting any of your intellectual property and materials.

Though service agreements vary across different businesses, there are 5 crucial elements that you will always have to keep in mind when drafting a personalized agreement for your business. Without further ado, let’s get right to it.

1. Details of the parties involved

A service agreement should begin with the details of the people who are associated with the business - this includes the names and addresses of both parties. If both the parties are a business, then the type of entity should be included as well. For example, if the service provided is by an electrical company or service provider, you should draft the electrical service agreement by mentioning both the electrician or electrical company and the client or business recipient of the service.

2. Details of the service provided

The next section will have to include an in-depth description of the exact service (or services) that are being provided for the client. By doing this, you can avoid problems in the future if the client happens to demand more or claim that the service provided falls short of what was promised to them in the beginning.

So, it’s important to elaborate on exactly what the client can expect during this service agreement, as this will also help them make an informed decision before stepping into business with you.

3. Fee payment and additional costs

You’ll need to be very specific about how you charge your service - whether the billing will be done on an hourly, daily, weekly, or monthly basis. You can also state if you charge a specific amount per project, and do not charge a set hourly fee. Under this section, you’ll have to include other financial costs and charges that may not be included in your service charges, such as travel expenses which will have to be billed and reimbursed separately.

You must also state what schedule you follow for payments and if there are any penalties for fees that are overdue or late. In addition to this, it’s best to also state what mode of payment is preferable to you (credit card, cheque, etc).

4. The starting date of the contract

It’s best to include the starting date of the contract as this will make it easier to know how many days or weeks you need to be paid for in the end. Including a basic work schedule will also make it better for the client to understand how you plan on completing the work, but also be sure to mention situations where the schedule may vary, depending on unavoidable situations (such as the weather, if relevant to your business), or if the schedule is delayed due to some action of the client.

5. Termination of contract

At the end of the day, you can never know what each situation or client might bring along, and there always should be some room for error. It’s best to give both the parties a right to terminate the contract within a period of time, provided that they give written notice of the termination prior to the actual date (either 30 or 60 days in advance). 

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Posted - 11/24/2021