4 Important Terms of a Service Agreement

Michael Wang
May 23, 2013

For businesses that hire other companies to do specific tasks, a service agreement is a necessity. Whether it is for office cleaning services or the design of a new product, this agreement creates a legal obligation to ensure that the company will receive the work requested and the service provider will receive payment for the work completed. Set out below are some common terms that are included in this type of agreement.

What Services Are Provided
The most important clause of a service agreement sets out the services which will be provided and the length of time which they will be provided for. Whether it is a job that can be done quickly or a job that is a long-term commitment for the company, this type of service must be thoroughly detailed in the agreement to avoid confusion. This way, both parties in the agreement can refer back to the document if questions arise during the service term.

Fees, Charges and Billing
A service agreement must outline all of the relevant details when it comes to payment for services. The company and the service provider will agree on what the charges should be for the service, if there are any other fees that need to be considered and how billing will work. The price may be charged hourly, per project or in some other way.

The next consideration that needs to be outlined in the agreement is when and how additional fees will be charged. Both parties of the agreement can decide how the company will be notified of additional fees and how these fees will be billed over the length of the service term.

The last decision that needs to be made with regards to payment is how the billing will take place. The billing can be done in a variety of ways including on a predetermined schedule. The process of billing will also need to include how much time the company has from the time they receive the bill until payment must be made to the service provider.

Non-Payment
Another important part of this type of agreement is what will happen in the event of non-payment by the company to the service provider. The agreement will outline how long the payment can be late and what consequences will occur when payment is not made past a certain number of days. Typically, this consequence is the termination of the agreement.

Termination of Agreement
One other term that should be included in a service agreement is what will happen when if the agreement is terminated. Typically this type of agreement will list the procedure and consequences that will take place when either party decides to terminate the agreement. The service provider will often detail termination with a set period for notice before termination, while the company within the agreement may detail the termination with failure to comply with any other terms of the agreement.

About the Author

Michael Wang is a Sydney-based legal consultant and writer. To get a better idea of writing legal documents, he recommends following a service agreement template or get one customised for you by lawyers at LegalVision.