If you are looking for a niche task done by your company, it is usually more sensible to hire an outside company or individual to do the work.
Why? It is because the outside parties, also called contractors, are competent and efficient when it comes to performing their specific tasks. Therefore, they are capable of providing the most comprehensive services, typically at a lower cost.
What exactly is a Service Contract?
A service agreement can be described as an arrangement that specifies what is expected of a service being performed by an individual or company in exchange for a fee.
The provider typically draws up a service agreement, signed by the business hiring the services, but it could be done in any way according to individual preferences.
Types of service agreements
There are many types of service contracts that can be used for various industries and types of work to be performed:
Type 1. Artist Service Contract
A service contract is utilized for freelance artists such as painters, designers, muralists, etc. The artistic services offered are flexible and dependent on the talent of the artists.
This agreement helps both parties understand the overall direction, intent and expectations for the work. It also includes the terms for payment and the time frame in which the artist must complete the artwork.
Type 2. Consultant Service Contract
This type of contract is often used for more specific and professional work such as IT services, legal advice etc. They are also referred to in the field of consultancy agreements.
Businesses can employ workers to perform these jobs, but hiring consultants allows for specific work by people with years of experience in their area. They are more knowledgeable and are able to provide more effective solutions.
Type 3. Product Servicing Contract
This is the most distinctive kind of contract for service because this type of service isn’t B2B but B2C.
When a company sells technology-based products that need maintenance and upkeep in the near future, they include service contracts.
The service contracts define the warranty guidelines, conditions, terms of periodic maintenance and the cost of servicing depending on the issue that the item has.
Type 4. General Service Contract
This type of contract is applicable to professionals such as electricians, plumbers and others employed on a contractual basis. In a commercial setting, they are employed to maintain and upkeep office buildings.
These contractors are highly skilled and experts in their field and are able to perform their work efficiently. They make use of their equipment and tools and have worked with multiple clients.
Reasons for Creating A Service Agreement
- Stops miscommunication
Verbal agreements are often prone to problems since various aspects like accent, memory or barriers to communication can affect remembered things.
A service agreement is carefully documented and read before signing. It clearly outlines all the obligations, tasks and responsibilities of the provider of services.
It also contains specific terms and conditions and therefore sets out clear expectations for the parties.
- Creates a Timeline that you must adhere to
A service contract specifies the service provider’s timeframe to get around. Because many types of services, such as maintenance, repairs, etc., must be carried out regularly, having a maintenance schedule allows for regularity.
This ensures that the total time of service is transparent to the customer, and they cannot demand additional services after the timeframe has expired.
- Make sure that the Payment Terms are decided.
A service agreement clearly defines the terms of payment and contains clauses that can influence the amount paid.
Therefore, it avoids the escalation of disputes or demands for changing the payment amount from one of the parties, which protects the service provider and the customer.
- Legal Security
Both parties execute the service agreement following an exhaustive reading.
Therefore, if a problem comes up, the contract is evidence of the agreement that was made and will provide legal protection if any issue arises.
How do you create A Service Contract?
Here are the most important elements you must include in your service contract:
Step 1. In the first step, mention the name of the Service Provider.
Start the contract by mentioning your name, the company’s name as well as the customer’s.
Step 2. Scope of Work
This section provides a detailed overview of the obligations of the service provider.
What are the kinds of services they can offer? What are the times the services need to be performed? What equipment and tools are the service provider planning to employ to ensure they do the best quality of work? How will they define “best task,” and what criteria will the parties use to determine whether the work was completed correctly?
Check that the contract contains each of these clauses in full, or else it will be difficult to judge if the service provider meets the requirements laid out.
Step 3. Discuss the Service Period
Define the length of time that the service provider will be expected to stay with the client. If there are periodic service requirements, be sure you record the frequency in your report.
Step 4. Add the Payment Terms of Service
Provide a detailed description of the payment conditions of the service, including the exact amount that needs to be paid, together with the currency used and the payment method.
Explain whether it will be one-time payments or regular payments. If the company is employed for a limited period, then explain when the payment will be cleared. If the consultant is hired on a monthly basis, describe the payment’s timing and how it will be divided.
Step 5. Intellectual Property Clauses
The agreement should cover the rights of the work performed by the service providers. This is the case for artists’ service providers (that provide artwork and designs) and contractual providers (legal advice or IT work).
In the majority of cases, the work completed by the service providers becomes the client’s property. However, based on the nature of the work, the parties could reach an agreement on the rights of the work.
Step 6. Confidentiality Clauses
Determine whether the work carried out by the company is to be kept private. This is also applicable to sensitive service contracts, which involve confidential information being shared with service providers.
Determine what information needs to be kept private and which is to be accessible for public inspection. State the legal and financial sanctions for violating the confidentiality clauses.
Step 7. Dispute Clauses
This section gives the guidelines to follow in the event of disagreement between the provider of services and the customer.
Step 8. Termination Clauses
The conditions to be listed would be in effect at the time of expiration of the contract, for example, contingencies and unforeseen events.
Step 9. The breach of contract clause
The final clause should define what happens if one of the parties violates the agreement. Define the penalties in the event of a breach of any one of these clauses.
Step 10. Signing Area
You should provide an opportunity for both participants to agree on the contract to make the agreement legal.
As you can see from these steps, drafting an agreement for services requires enormous time and focus on the details.
As an example, if you draft the contract, you would want to ensure that it is proofread by your supervisors and other employees from other departments to ensure the contract is in line with the company’s goals.
Therefore, it requires a team effort. This isn’t possible by using standard document creation tools such as MS Word. A service contract should be created using an open platform that permits you and your employees to collaborate on the document in real time.