46+ Sample Service Contracts

What Is a Service Contract?

In general, a service contract is an agreement between a service provider and a client. One example is a web developer who is creating a website for an online shopping business. Another example is a contract made between an employee and an employer. Businesses need a service contract to start a process and achieve what is intended.

Service contracts usually contain deadline details and payment arrangements. Moreover, service agreements can be broad or specific in terms of coverage—depending on the customer’s needs. Both parties must come up with the same conclusion in completing the contract. This is important to avoid additional service costs that the customers might spend.

What are Example Models of Service Contracts?

Before we continue learning about service contract examples, let us differentiate an agreement from a contract. Basically, an agreement is a broad term that involves an arrangement between two people concerning their obligation to honor each other’s businesses. On the other hand, a contract is an agreement that is bound by the law, and it needs to meet the requirements set and agreed upon by the involved parties.

Data from Statista revealed that in 2018, about 3.6 billion USD was spent by the public sector on commercial construction projects in the United States. Taking this information into account, we can presume that the construction industry is on the rise. And being a part of this sector would mean that you have to prepare a service contract for your clients. With that said, here are some examples of service contracts offered when building establishments according to Projects of Energy Community Interest (PECI):

1. Inspection

It is the most affordable contract among other types of construction contracts, and it only requires scheduled inspection visits by the contractor. The payment fee is fixed and has to be remunerated annually by the owner. The inspection contract is most beneficial for small building constructions that only require uncomplicated mechanical systems. The task of the contractor is basically inspecting whether a piece of equipment is broken and keeping the owner updated.

2. Complete Labor

This type of contract covers maintenance, repairs, and replacements for almost all equipment needed, even if the clients themselves provide such equipment. Excluded in the plan is the installation of weighty plant equipment. In terms of service for emergencies, the contractor may require the owner to pay for additional labor.

Complete labor is an expensive type of service contract. Its coverage may benefit individuals who own several properties and large buildings because they can easily provide their contractors with complete materials for construction. On the other hand, owners who desire to construct smaller buildings may have some issues with this type of contract. It is because the contractor is only mainly responsible for labor and not for performing preventive maintenance.

3. Complete Coverage

This type of service contract gives complete labor coverage and all the types of equipment needed, including service for emergencies. Full coverage for preventive maintenance is also included in the management. In cases when preventive maintenance is not a part, the client can ask for an insurance policy if repairs and replacements are needed. Doing so holds the contractor ultimately responsible for every equipment.

With this type of coverage, the contractor holds the responsibility of conducting preventive maintenance on a regular basis to avoid any equipment failure that may happen in the future. Even if this contract is costly for the client, it can also save him/her some money in the long run, since the contractor carries the majority of risks that may happen during construction.

4. Preventive-Maintenance

This is one of the most sold contracts in terms of construction because of its economical price. The contract has to be paid at a fixed price and included in it are several scheduled activities. These activities include belts and filters replacement, washing both outdoor and indoor coils, bearings and motors lubrication, cooling towers maintenance, control functions inspection, and corrosion prevention. The owners themselves carry most of the possible risks in this type of contract. Therefore, the client should know the limit of the preventive maintenance plan that the contractor offers.

Boilerplate Provisions

A commonly overlooked provision in most business proposal contracts is the boilerplate provisions. These provisions decide on how a contract agreement should be understood, what system of laws should rule over the contract, etc. Although boilerplate provisions are only part of the miscellaneous, they are still an essential part of the contract. Here are some examples of boilerplate provisions:

The Force Majeure: The “force majeure” provision includes a list of events that will possibly get out of hand in one or both parties. The parties involved would not want to be under any unexpected liabilities that are foreseeable and out of their control. In simple terms, the provision is a clause for risk management.A Law that Governs: In case of future disputes, the contract should be ruled over by a system of laws. The service provider should carefully think of state laws that are applicable and related to the business contract they made.A Resolution for Disputes: Two parties who have agreed on a contract are on a continuing relationship with one another until the contract’s goal has been achieved. If disputes arise regarding the contract they have agreed on, they may choose to resolve the issue through an arbitrator instead of going directly to court. Furthermore, there are parties that choose to have a “Good Faith Effort” and try to resolve the dispute between themselves. Usually, this clause obligates both parties to meet when it is possible, given that a dispute notice has been laid out.The Full Agreement: The provision for an entire agreement is a written accord of the understanding of both parties concerning the whole contract. Therefore, it is extremely important that all the terms being agreed upon are not lacking. Moreover, a statement declaring that both parties have not relied on a pre-contractual statement should be included. Without this, a customer may state claims and take advantage of these. In this way, the company that provides the service can defend itself against claims that are said to be a cause of misrepresentations.

How to Construct a Reliable Service Contract

Every service-providing company should consider having their own service contract. If you own a business, you can’t just simply have verbal agreements with your clients and not provide them with any supporting documents. Not providing service contracts to your clients will give them a feeling of uncertainty in terms of the service you provide. When creating an effective service contract, you should have the goal of your company in mind. Once you have created one that fits your company’s objectives, it will be easier for you to convince your customers to purchase the services you offer. In this section, we have outlined a step-by-step guide to help you draft a service contract for your business.

Step 1: List Down the Definition of the Services You Provide

This part of the contract is essential, and it is also an important part of your marketing plan. Create a list of the services you provide and define each service as specific as possible. The problem with a broad definition is the clients may claim services that can be categorized under every broad definition you provide. However, you can allow your clients to propose any additional agreement that might be necessary for the completion of the project. Moreover, you should also add some extra services that your clients may consider purchasing.

Step 2: Specify the Costs and Fees of the Contract

Don’t let your clients guess what the price is for every service you provide. Give them detailed information about what they need to pay to effectuate the service contract. Specifications for payment should be included as well, such as the number of times your client has to pay for the expenses. Let them know if the payment is one-time or divided on a weekly or monthly basis. Also, inform them of the allowable methods of payment. Lastly, the contract should contain a detailed explanation of where the expenses are going to be allocated.

Step 3: Layout the Conditions for Termination

Almost every business contract we know has conditions for termination, and this is also true for service contracts. The service contract you create should give certain conditions for termination that is beneficial for the parties involved. Nevertheless, the company should avoid causes for termination as much as possible because this may affect the sales of the company.

Step 4: Include an Agreement for Confidentiality

This part of the contract is for the safety of the company’s business. Also known as a non-disclosure agreement (NDA), this keeps workers from needlessly giving out confidential information about the business. It includes the company’s marketing strategies, supplier details, and more. In some cases, clients may ask for some confidential information that might be needed along the process. In such situations, the client should be compliant with the NDA.

Step 5: Present the Client Cooperation Requirement

Clients play a major role in completing a contract. Client cooperation can be advantageous for your business because it provides an opportunity to build relationships with your customers. You should be responsive to your clients by constantly communicating with them. Maybe while going through this part of the project contract, you can create a partnership with your client that will benefit both your businesses. Also, this will help you build a constant relationship with your client. This is a better way than to just pass by and forget about the client once the term is done. According to a study by Leszek Koziol and his team, many businesses claim to have an advantage in terms of competition because of their relationship with their customers.

Step 6: Indicate the Compensation for Possible Damage or Loss

A provision for indemnification should be enforced in important business documents. This legal provision is usually compulsory in instances where a high percentage of risks that may result in damage or loss are expected. Explaining this part to your client is the key to making them understand this provision. Inform your customer of the favor the indemnification also offers them. By including this provision in your contract, you lessen the risk of unwanted expenses that are caused by a breach of contract, misbehavior, etc.

One example is a homeowner who signed a service contract with a contractor, and during a visit, the homeowner fell off a flight of stairs because of the contractor’s noncompliance with building codes. If the service contract had an indemnity provision, the contractor has to pay for the damage that he caused to his client. The same is true vice versa. Aside from the sections or clauses mentioned, don’t forget to include the boilerplate provisions in the service contract.

Both small and large companies should seek to have service contract proposals that will help support the system of their businesses. Through service contracts, your agreement with your clients becomes legal and reliable. With a service contract at hand, your customers will trust you more by assuring them of your intention to complete the service on time. In the end, all you really want to gain is the trust of your customers, and in the process, you may also earn their loyalty.