A contract letter for services entails an agreement between two parties that will exchange services/products and money. Before you dive into a new business venture, you should draft a letter of agreement to ensure both parties know what’s expected of them. A service contract is a written document describing the terms of services provided by one party to the other. You should use the agreement letter if you wish to enter into a contract and want to define the conditions of terms of the contract.

You can use a letter to commence negotiations, or you can replace a formula business agreement with a letter of agreement. Regardless, a letter of agreement establishes the terms of a business relationship. Most importantly, a letter of agreement outlines what’s expected of all parties involved.

You may also recognize a service contact by the following names:

  • Service level agreement
  • Letters of agreement form
  • Consulting services agreement
  • General service contract

Service providers should also expect to be compensated fairly and maintain your interests in a contract. Customers should use a service agreement when hiring a service provider to conduct a certain task to outline the precise details of an arrangement, such as

  • Duties
  • Compensation
  • Confidentiality

Letter of Agreement Requirements

One thing you should know is that there is no established format regarding a letter of agreement. Ensure you include such info as:

  • Contact information of all parties
  • State laws governing in the contract
  • Dates of previous negotiations
  • Agreed terms and payment arrangements
  • Date when the contract goes into effect

When it comes to descriptions, you can make it simple, such as a newsletter. You should also keep detailed descriptions to avoid potential misunderstandings. Detailed description also allows all parties to know every aspect of a deal.

Components of an Agreement

When determining a compensation arrangement, you should include the pay rate and if tax will be included. Include other details, such as payment schedule and who will offer the necessary resources and penalties for late payments non-performance. You should also include terms pertaining to non-competition, non-solicitation, and confidentiality.

Such clauses can protect sensitive information about yourself or a company. Non-competition and non-solicitation clauses depend on customer preference. For example, the contract could stop service providers from soliciting or competing for business in an unfair way for a certain time period.

The next part should include ownership rights, especially materials or products created during the business relationship. The overall project cost is another factor, as this clause helps you budget accordingly and estimate the number of freelance hours. The clause should also establish the terms and how much a client would pay. Keep in mind the other following expenses:

  • Phone costs
  • Mileage
  • Freelancer fees

You may also leave room for open projects, which means that a freelance can be compensated for a certain hourly rate during anytime he or she works. Timelines are especially important and should include certain dates. For instance, include a provision noting first draft due date and when a final draft is due. The terms of payment should also determine how freelancers would be paid.

When it comes to a working relationship, it’s common for clients to pay half down at the start of a project, with the remaining balance within 15 to 30 days after a final product gets delivered. The rights could be retained via a service provider or can be solely granted to a customer.

For any copyright matters, contact a lawyer who specializes in intellectual property rights. To further customize your agreement, you can add additional parties, such as:

  • Return of property
  • Indemnity
  • Legal expenses
  • Liability

The addition of terms is an optional choice and will depend on the nature of the deal.

Written Agreements

Even though oral and written agreements are legally-binding, you should draft a written agreement to ensure that all parties are on board. Also, a written contract is more legally-binding and can be easier to prove in court than an oral agreement. Oral agreements can be proved in court, but you stand a better chance through a written record of the agreement.

Dealing With the Right People

Above all, you should make sure you’re dealing with the right person before entering into an agreement. Further, always negotiate with a boss instead of a middle-man. Dealing with a high-level manager is always the best solution. Ensure that the person you’re negotiated with has full legal authority to tie an organization to the contract.

If you need more information on a contract letter for services, post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.