45+ Sample Service Agreements

What Is a Service Agreement?

In business, there is no guarantee that customers will receive the products and services with the quality promised to them. On the other hand, it is not always that business owners receive proper compensation for the goods and services they provided to their clients. These unfortunate circumstances are when legally binding documents such as an agreement becomes beneficial. One example of agreement companies make use of is a service agreement. It is a written arrangement between two or more parties where one agrees to provide a specific service to the other in return for financial compensation. Just like other types of agreement, it gives both parties an outline of their rights and responsibilities as the service provider or the client. Whether it is a business-to-business or business-to-consumer negotiation, having a formalized and written form of communication regarding the terms and conditions of the process is crucial. It protects those who are involved in the event that the opposite party fails to meet the expectations of the other.

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Service Agreements: The Essential Elements

Some people are more than willing to spend their money to attain the peak of security, convenience, acceptance, and optimal health. For this reason, they look for products or services that will grant them the comfort and enjoyment they need. In relation to this, Inc. magazine revealed that the biggest industry in the United States last 2018 was the health industry with a total revenue of $36.3 billion. This was then followed by financial services ($15.1 billion), consumer products and services ($14.4 billion), logistics and transportation ($12.6 billion), business products and services ($12.5 billion), and construction ($12.5 billion). With this information in mind, we can tell that part of the people’s expenses are not just for products but also for the services they enjoy. And whether you are a part of the multibillion-dollar service industry or not, you should know the importance of a written agreement in making business processes more efficient and secured. Aside from that, you should also have a full understanding of the key elements of a service agreement so you won’t encounter difficulties in writing the document. There’s no need to worry about that, though. In this section, we have provided you with an outline of the different elements your service agreement should reflect.

Parties Involved: Any type of agreement has one common component—a definition of the parties involved. In any agreement format, it is crucial to write the recital or introduction before laying out the terms and conditions of the agreement. That is why, after stating the date of effectivity of the service agreement, mention the name of the company or entity which will render the services to the client. Then, specify the business or individual as the other party. Also, you have to indicate in your document the term you will use when you mention the parties in the clauses of your agreement (e.g., service provider company, company, or client).Description of Services: While every component of a service agreement is essential for it to be effective, one of the vital pieces of information it should have is the definition of services the company will provide to the client. You should bear in mind that being specific is a must when writing this section. You have to give your clients the most accurate picture of the services rather than describing it in a broad manner. Setting a clear scope and limitation of the services will let the customer know what to expect from you.Scheduling: It is essential to indicate the scheduling arrangement in your service agreement, especially when you are a freelancer or an independent contractor. Let your clients know if you can provide services to them during weekends or holidays. Moreover, it would also be beneficial if you set the number of hours or a particular time when clients can expect you to work.Rates and Payment Arrangements: A service agreement would not be complete if it does not reflect the rates of the services your business offers. As a service provider, you know the significance of transparency in the business industry. That is why you have to provide your clients with a breakdown of the potential fees they will pay after the completion of the project or service. This clause should also specify how you will compensate the client. Some service providers charge their clients on a per-project, hourly, weekly, or monthly basis. If the labor extends for quite a long time, you should communicate to the clients how often you expect them to pay and the acceptable payment methods.Indemnification: In business, we could not avoid some cases of harm or loss. That is why a service agreement should have a clause sets out the rules of compensation for these matters. We refer to this section as the indemnification clause. Indemnification means that either party has the obligation to pay the other against damage, loss, or injury incurred to the other party due to the misuse of services and other circumstances.Termination of Agreement: Aside from stating the effectivity date of the service agreement, it is also important to include in your legal document its date of termination or until what particular span of time is it effective. You must indicate the grounds for termination or under what specific circumstances can a party terminate the agreement. If there are any renewal provisions, make sure to include it in this clause. Moreover, bear in mind that either party should provide proper notice before initiating an action to terminate the agreement.

Advantages of Having a Service Agreement

Establishing good customer relationships is vital in every business. It helps increase the customer base and boost sales of an enterprise over the course of its operation. In the service industry, there are countless ways to foster good customer relations—one is a mutually beneficial service agreement. Legally binding documents are not just for the sake of formality. As you read this section, you will fully understand the significance of implementing a service agreement to your business.

Provides Assurance to the Customers

A tangible record of the agreed-upon terms will assure the customer that they will receive products or services with the best quality. If a product seller offers maintenance and repair services to the buyer, it will give a notion to the customers that the items offered to them are durable since the seller will cover additional costs incurred for maintenance or repairs. As a product seller, you would not want to spend more for warranty services, right? Thus, you have to make sure that the item you are selling has minimum chances of failing. On a different note, it would also guarantee a service provider’s client that the service they will avail is worth the price.

Sets a Clear Course of Action

A service agreement does not only set out the types of services businesses will provide for a specific time frame. It also specifies the consequences either party will face in the event that they fail to meet their obligations. Knowing that there is a course of action to take for unmet standards, responsibilities, and obligations, both parties will see to it that they won’t breach the agreement and abide by the agreed-upon terms.

Secures Financial Arrangements

As previously mentioned, one of the most essential components of a service agreement is the cost for service, price range, or rates for the services rendered. Thus, whichever price you and your clients agreed upon should be reflected in the legal document. Moreover, a written agreement also makes it clear to the customers that the service provider will charge them for late payments. Without a written service agreement, there is a tendency that you won’t receive proper compensation at the right time. In case your clients fail to settle their payments even after the completion of a project, it would be best to send them an invoice to remind them of their fees.

Eases Minds

A verbal agreement provides no proof of the agreement made between two parties. As a result, it might not give either party peace of mind, thinking that the other might break the rules and breach the agreement. A sure solution to this dilemma is a written service agreement that obliges both parties to observe strict compliance with the regulations.

Helps in Resolving Disputes

In relation to the aforementioned advantage of a service agreement, one of its most beneficial aspects is that it helps in resolving disputes between two parties or more. Whenever the other party fails to do their obligations as a service provider or customer, the opposite party can refer to the document and point out which provision has been violated. It will be easier to resolve disputes in the presence of a document that is legally binding.

How to Draft an Effective Service Agreement

Due to the technological advancement in this modern world, one of the fastest-rising business in the service industry is information technology. Data from Statista showed that on a global scale, individuals and other corporate entities are expected to spend over a trillion U.S. dollars on IT services. Bearing this number in mind, we can say that the growth of this particular industry is evident. Aside from IT services, people also pay for transportation, wellness, convenience, and professional services. Some examples of these are paying for professionals like lawyers or engineers, spending money for HVAC maintenance or lawn care, and among others. If you are a service provider or you are selling a particular item that might need repairs or maintenance, you may need to enter into an agreement with your clients. Provided below is an outline of how to write a service agreement for your business.

Step 1: Write the Recitals

Legal documents like contracts and agreements don’t lay out the terms and conditions in the first sentence of the first paragraph. It first needs to give the readers an overview of the document. For this reason, the first step in drafting a service agreement is to provide a title for the document, indicate the effectivity date, and define the parties involved. After this, start writing an enumeration of terms used in the service agreement—or recitals. Usually, these statements begin with “whereas,” and they come before the main texts which provide both parties a gist or a general idea of what the document is about.

Step 2: Include Both the Inclusions and Exclusions

Now that we have discussed the essential elements of a service agreement, you probably know by now the provisions you need to consider when writing the document. After writing the recitals, you can start presenting the terms and conditions that both parties will adhere to. Moreover, you should keep in mind that aside from specifying the services you will cover, you should also indicate the exclusions or the services that are not included under the agreement. Doing so will give your clients a clear understanding of the inclusions, scope, and limitations of your coverage.

Step 3: Format Your Document

To communicate professionalism and establish credibility, you need to make your written service agreement as neat and as presentable as possible. It would be best if you make use of standard business fonts so that it won’t be hard for the parties involved to read the document. In addition to that, you should also provide appropriate headings for each particular provision to eliminate confusion. You can also download ready-made and professionally written service agreement templates to save you from the hassle of writing and formatting your document from a blank page.

The last thing you’d want to experience is having a service agreement that does not comply with the industry’s standards. It would never be good to have a legal document that is not in line with the laws. Therefore, it is best to seek legal counsel and have your document reviewed before conveying to your clients the terms and conditions outlined in the agreement.

Step 5: Negotiate

At the last portion of the service agreement, provide enough spaces for both parties to affix their signatures after discussing the terms and conditions. Then, proofread your document to make sure that it is free from errors and send it to the parties involved. Before the agreement takes full effect, though, both parties should discuss the provisions, rights, and responsibilities outlined in the document. Negotiate until you, as the service provider, and your client will come up with an arrangement that will benefit both parties. If there are any revisions or both parties agreed to alter some of the rules, don’t forget to put it into writing.

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