Business AgreementsLegal Advice

How to Draft a Service Agreement

A step-by-step guide to everything you need to include in a service agreement. Know how to write the description of the parties involved in the agreement.

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Oral understandings can be risky, but they can also be beneficial sometimes. But during a meeting with several service providers, your client might get mixed up with the scope of work you’ve described. 

You could forget to include important information, like when extra charges apply. These kinds of mistakes and misunderstandings can lead to disputes and even lawsuits if they aren’t written down. This is why it’s important to have service agreements.

Who Needs a Service Agreement?

When you buy a car, computer, or another thing, you usually get it right away. It doesn’t matter if you order something and wait for it to arrive. You know what to expect and what you’re getting. 

But you can’t look at a service before buying it the way you would at a machine. There are a lot of long-term services that people pay for, and they often pay the fee, or at least a part of it, long before they see what their money buys.

For example, a developer who makes custom software for a company will likely go through a lot of steps before delivering any work. These steps include figuring out what the company needs, designing the software, installing it, and testing it.

A written service agreement is a way to make sure everyone is on the same page while the work is being done. It also makes sure that both people get their agreed fees within the time frame they decide. 

Agreements are not required for all services. For example, if you take your car to a quickie oil change shop, you and the owner are likely to agree on the price, what will be done, and when. But when work is done over a long period of time, both parties need written standards, goals, and prices to protect them.

A lot of businesses and professionals use service agreements.

  •  Management consultants, graphic designers, and illustrators, as well as photographers and Videographers, work with them
  • Developers and IT service providers make websites and help people who use them.
  • Brokers in real estate
  • Accountants and lawyers work for general contractors and construction firms
  • Those who work in advertising, marketing, and catering.

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How to Write a Service Agreement?

In the section below, we will walk you through the steps to writing a service agreement. 

  • ‘Customer Agreement,’ ‘service agreement,’ ‘Client Agreement,’ or any other title that best fits your situation should be the title of the agreement
  • The name of your company should also be in the title. A ‘Listing Agreement,’ for example, is a contract that real estate brokers use when they agree to help people find homes for sale 
  • If you hire an accountant, they might use something called a ‘Tax Preparation Agreement,’ and so on
  • There are many parts of a service agreement that can be standard, and you can make what’s called a ‘Template’ that includes most of the things you’ll need most of the time 
  • You might have to change your template to fit the specific arrangements you make with a single customer. Most of the time, you can fill in the blanks without starting over with each new client.

What does a Service Agreement Include 

Some businesses and professions might need extra sections, but in general, a service agreement should include these sections and topics:

A Description of the People who Agreed to the Deal

  • The names and addresses of the people who are involved should be at the top of your agreement 
  • There should be more information about one or both of the parties. Is it a business, a corporation, or an LLC 
  • People who work for our general contractor might say things like: “This is a contract between Joe’s Beautiful Homes, a limited liability company that is based at 100 Main Street, and Mary Smith, an individual who lives at 100 Pine Street.”

A Description of What Will be Done

  • Keep in mind that you can’t change your fee if you end up doing more work. 
  • A caterer would want to know how long they would be at the event, how many servers there would be, how many people would be fed, and how much and how good the food would be. 
  • List everything that will be used in the agreement. And mention how much time it will take to complete the agreement. So that caterer can cover the cost of the agreement. (for example: serving only organic produce will cost more than conventional produce, and describing the food as organic will prompt the caterer to take its added expense into account).

A-List of Fees and Payment Schedules

Make sure to say if the charges are hourly or weekly or flat-rate per project. You might also need to say if the price includes things like travel costs for a consultant who has to go to different places at work or if those costs have to be paid for and reimbursed on their own.

A Contract has a Due Date and Expiry Terms

  •  It is the date that both parties agree to the terms of a contract. Often, the effective date is the date both parties sign the contract, but it doesn’t have to be 
  • Next, include a work schedule. At the very least, work done on a project should have start and finish dates. As a project goes through different stages or steps, you might list other due dates.

Like an IT maintenance contract, ongoing services usually last for a year or six months. At the end of that time, there are usually options to renew the contract.

Include a Place where People can Sign

Service agreements should always be signed and dated by both people who use them. So that no one can say later that they didn’t sign, it’s a good idea to have the signatures notarized, as well.

Conclusion

Usually, the draft pattern is the same for general agreements. Only a few exceptions require small changes. Once you prepare a draft, it will be useful for a long period of time. Hopefully, above mentioned simple steps will help you prepare a draft for the service agreement.

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