Key Takeaways

  • A comprehensive electrical service agreements template should outline the full scope of work, maintenance obligations, and performance standards.
  • Including clear terms for extra work, start-up costs, and unscheduled maintenance helps prevent disputes and ensures predictable costs.
  • Detailed provisions on performance guarantees and early termination rights protect both parties and keep the agreement adaptable.
  • Modern templates often include sections on safety and compliance, payment schedules, and client responsibilities to ensure legal and operational clarity.
  • Service-level expectations, response times, and communication protocols should be built into the agreement for long-term success.

Long Term Service Agreement Overview

A long term service agreement example is a typical document that you will encounter if you own industrial-scale power generation equipment. Long term service agreements, or LTSAs, require that the original equipment manufacturer, or OEM, provide maintenance services for their equipment on a more or less fixed-price basis. Having guaranteed support and a steady pricing plan can be very advantageous to the equipment owner, although the complex nature of LTSAs can lead to costly, time-consuming disputes with the manufacturer.

Essential Components of an Electrical Service Agreements Template

When drafting an electrical service agreements template, the goal is to clearly define the terms and expectations between the service provider and the client over the long term. While LTSAs for industrial equipment focus on OEM responsibilities, electrical service contracts typically extend beyond maintenance to include installation, upgrades, safety inspections, and ongoing support. A well-structured agreement should cover:

  • Parties and project scope: Clearly identify the service provider and client, outline the specific property or equipment to be serviced, and define the nature of the work (e.g., installation, inspection, repair, upgrades).
  • Service frequency and duration: Specify how often services will occur (e.g., quarterly inspections, annual testing) and the total term of the agreement.
  • Payment terms: Define how and when the client will be billed, including flat fees, hourly rates, milestone payments, or subscription-style billing.
  • Compliance obligations: Require that all work complies with applicable building codes, safety standards (such as NEC), and state or local regulations.
  • Safety protocols: Outline responsibilities for maintaining a safe work environment, including lockout/tagout procedures, PPE requirements, and site access protocols.
  • Documentation and reporting: Include clauses requiring service reports, inspection records, and certifications to be delivered after each visit.

LTSA Work Scope

A typical LTSA should define the scope of the maintenance work in terms that are clear and easy to understand. To do this, the LTSA should:

  • Include a detailed list of the equipment and components that the OEM is obligated to maintain.
  • Describe the OEM’s maintenance obligations as they relate to each component and piece of equipment.
  • Describe the activities to be undertaken for all scheduled maintenance outages and the OEM’s obligations related thereto.

Additionally, the LTSA should define the overall goals of the maintenance program and require the OEM’s maintenance work meet these goals. This should be done to act as a catch-all to cover anything that was not covered by the above three items.

Defining Maintenance and Emergency Response Standards

Beyond routine tasks, a high-quality electrical service agreement should detail how emergency situations and priority issues are handled. These clauses protect both parties and minimize downtime:

  • Response time commitments: Define what constitutes an emergency (e.g., power failure, system overheating) and establish response windows (e.g., within 4 hours for critical issues).
  • Preventive maintenance schedule: Include a detailed timetable for inspections, testing, and preventative actions to reduce unexpected failures.
  • Service quality metrics: Set measurable standards such as uptime percentage, average repair time, or maintenance report delivery deadlines.
  • Remote monitoring options: Some agreements include ongoing system monitoring to detect faults early, adding significant value for the client.

Extra Work

A typical LTSA should also cover a concept referred to as “extra work.” Extra work allows equipment owners to request services of the OEM that are not covered by the work scope. For instance, under “extra work” an owner may request the repair or replacement of equipment components that may normally be considered “inspect only.”

“Extra work” does not have to be performed by the OEM, but if it is, it will be subject to the same obligation as pertain to any other work stipulated in the contract. Compensation for “extra work” is usually based on a pre-arranged pricing schedule. All details pertaining to this should be clearly stated so as to avoid confusion and contract disputes.

Change Orders and Scope Adjustments

Even well-defined contracts must account for changes over time. Including a “change order” process in your electrical service agreements template helps manage unexpected requirements without disputes. Key provisions should include:

  • Written authorization requirement: Any work beyond the original scope must be requested and approved in writing.
  • Cost adjustments: Define how pricing for additional work will be calculated—either as a fixed rate, hourly fee, or based on updated estimates.
  • Timeline modifications: Adjust completion schedules accordingly and document them to maintain accountability.

This structured approach ensures both parties have clarity on how modifications affect cost, time, and liability.

Start Up Costs

A well-written LTSA will also account for start-up costs, which are costs associated with bringing the equipment on-line. Heavy duty power generation equipment may require much testing and troubleshooting to get it ready for operation, which may include running the equipment and powering it down multiple times to test its functionality, and an OEM may bill its client for the costs associated with this. A good LTSA will account for this by stipulating that these start-up efforts be paid for by the OEM and that the OEM will not raise its regular business price to cover this cost.

Performance Guarantees

Performance guarantee provisions are also something a good LTSA will have, as they provide monetary incentives for the OEM to respond to operational outages in a timely manner. What constitutes a [timely manner]https://www.upcounsel.com/time-is-of-the-essence-clause-in-construction-contracts) and what level of care one receives should be stipulated in the guarantee, as well as what will happen if continued care to the OEM’s products is necessary. Usually, if enough problems continue to occur, the LTSA will be set up so that this constitutes a breach of contract.

Unscheduled Maintenance and Warranty Obligations

A good LTSA will also be clear on which party is to pay for unscheduled maintenance under the warranty. A common problem amongst poorly written LTSAs is that one reading of them can obligate the equipment owner to pay for unscheduled maintenance, while another interpretation can require the OEM to pay for it. When essential equipment goes down unexpectedly, jeopardizing the efficiency of your business, the last thing you want to worry about is who is going to pay for it. All it takes is one clearly stated sentence to avoid this problem.

Liability, Insurance, and Indemnification Provisions

A thorough electrical service agreement must address risk allocation. Including liability and insurance provisions ensures that both parties are protected if something goes wrong:

  • Insurance requirements: The contractor should carry general liability insurance, workers’ compensation, and, if applicable, professional liability coverage.
  • Indemnification clauses: Each party should agree to indemnify and hold the other harmless against claims arising from negligence, breach of contract, or third-party damages.
  • Limitation of liability: Many agreements include a liability cap, such as limiting damages to the total amount paid under the contract.
  • Force majeure clause: This protects both parties from liability due to events beyond their control (e.g., natural disasters, government actions).

Early Cancellation

A typical, well-written LTSA should allow the equipment owner to terminate their contract should it no longer make business sense to be in it. OEMs will often desire that a long term agreement should be truly long term, but the equipment owner should be wary of binding themselves to paying more than what is normal for the market in years down the road. If the OEM is resistant to this, one possibility is to give the OEM beneficial terms in some other aspect of the contract. Another is setting up a liquidated damages fee that, once paid, would allow for early cancellation of the contract. This give and take is the essence of negotiations.

Renewal, Termination, and Dispute Resolution

Since long-term electrical service agreements often span several years, it’s important to include terms governing how the contract can be renewed, ended, or resolved in case of disagreement:

  • Automatic renewal: Specify whether the agreement renews automatically and the notice period required to cancel.
  • Termination for cause: Define breach conditions (e.g., repeated safety violations, non-payment) that allow immediate termination.
  • Mediation or arbitration: Include a dispute resolution process to minimize litigation costs and resolve conflicts efficiently.
  • Transition support: If the contract ends, specify how records, documentation, and ongoing maintenance obligations will be transferred to a new provider.

Frequently Asked Questions

  1. What should an electrical service agreements template include?
    It should include project scope, payment terms, maintenance schedules, liability clauses, emergency response standards, and termination provisions.
  2. How long should an electrical service agreement last?
    Most agreements range from one to five years, with renewal options to extend the contract based on performance and client needs.
  3. Who is responsible for unscheduled repairs?
    The agreement should specify whether the provider or client bears these costs. Clear warranty terms help avoid disputes.
  4. Can the contract be changed after signing?
    Yes. A change order clause should outline how additional work, cost adjustments, and timeline changes are approved and documented.
  5. Is insurance required for electrical service providers?
    Yes. Most contracts require proof of liability and workers’ compensation insurance to protect both parties from financial risk.

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