Drafting Services Contract: Everything You Need to Know
Several steps go into drafting services contracts such as the language that will be used in the agreement to clearly define the contractual relationship.3 min read
Updated November 23, 2020:
Several steps go into drafting services contracts. In particular, you need to negotiate the language that will be included in the agreement so that the contractual relationship will be clearly defined.
What Is a Service Agreement?
Basically, a service agreement is a contract that requires one party to provide a service for another. Usually, the party receiving the service will provide monetary compensation to the party providing the service. Service agreements go by several different names, such as:
- Consulting services agreement
- General service contract
- Service level agreement
If you are a service provider, you must get your clients to sign service agreements so that you will be guaranteed compensation for your services. Customers should also insist on a service agreement, as they firmly outline the arrangement between the customer and the service provider, including outlining such issues as the:
- Duties of the service provider
- Compensation due to the service provider
- Possible confidentiality requirements
Writing a Service Agreement
When writing a service agreement, several steps must be followed for the agreement to be legally binding. First and foremost, the service provider and the customer should be identified in the agreement and their contact information should be included.
Once you've listed the basic information about the parties involved in the service agreement, you need to describe the service that will be provided clearly. This description must be as clear as possible, so there will be little chance that either party will misunderstand their responsibilities.
Next, you need to define a payment schedule. Determining payment is a little more complicated than most believe, as it requires negotiating several different factors. First, you will need to determine the pay rate for the services and decide whether taxes will be included. Second, if payments will be made incrementally instead of all at once, you need to determine a payment schedule. Finally, you must decide if late payments will result in penalties.
The third step of the process of drafting a services contract is to discuss whether the agreement will include a confidentiality or non-compete clause. These terms are not required, but they can be beneficial if the customer wishes to protect their private information. If the service agreement will result in the production of materials, you will also need to negotiate ownership of these materials. Either the service provider or the customer can be granted ownership rights to materials created through the duration of the service agreement.
Finally, you can personalize your service agreement however you see fit. A wide variety of clauses can be added to service agreements, meaning you can customize your contract so that it fully protects your interests. Clauses added to a service agreement can cover a wide variety of issues, including:
- Legal expenses
- Return of property
Common Mistakes When Drafting a Contract
When you draft a service agreement, you should be aware of several pitfalls. For example, trying to write a contract clause from scratch is a bad idea unless you have a strong legal background. The better idea is to base any custom clauses you need to include in your contract on sample clauses from other service agreements. Basing your clauses on these sample clauses will make sure that the contract is clear and enforceable.
Using inconsistent phrases and terms is another pitfall that you must avoid when drafting a service agreement. All necessary definitions should appear at the beginning of a contract instead of within a clause or section of the agreement. If there is any ambiguity in the terms you use in your contract, they may make the contract unenforceable or may put your interests at risk. Make sure that the terms you use are concretely defined and easily understood.
You should also be sure that you do not leave out any key details when writing your agreement. A strong contract will completely describe the duties of all parties and will cover all the necessary information, no matter how minor it may appear. Leaving out information can make it hard for the contractual parties to understand their responsibilities, making it difficult to fully execute your agreement. Failing to include necessary information may also cause disputes between the parties that results in a lawsuit.
If you need help with drafting services contracts, you can 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.