If you work as a service provider and don’t have a Service Agreement, you’re flying blind.
You’re practically asking for late payments and scope creep from your clients.
The good news?
We’re going to cover exactly what you need to know and why it’s essential to have a contract so you are legally protected.
Let’s get started.
What is a Service Agreement?
A Service Agreement is a contract that covers the provision of services to a client by a service provider.
When things turn sour, a verbal agreement will not cut it. You need a properly written contract to enforce your rights.
A Service Agreement includes all of the crucial elements of your working relationship with the client. This includes the services you will provide, your fees, payment terms and other important clauses such as confidentiality, termination and limitation of liability.
We’ll go into more detail further below, but for now, think of it as the definitive record of what you have agreed to and how you will manage the work.
Who can use a Service Agreement?
Service Agreements are very common and can be used in almost any industry.
Any business which provides a service to an individual or business should have a contract with terms and conditions.
You might have seen contracts called other names (e.g. Terms of Business, Consultancy Agreement or Contractor Agreement). Don’t worry too much about the name, they are all similar types of agreements.
The important thing to understand is that this contract covers your relationship with your clients.
Do I Need A Service Agreement contract in Australia?
Don’t make the same mistake as other Australian service providers who delivered their end of the bargain only to be left with a client who refused to pay them, or worse, simply disappeared, never to be heard of again.
Here’s the thing:
You want to get paid for your work (duh!), but If you can’t prove it, you’re going to have a hard time chasing anyone down for payment through the proper legal channels.
That’s why you have a contract!
Unfortunately, the legal side of small business can go neglected (or worse, ignored) for far too long due to a lack of funds, knowledge, or both.
Don’t make the same mistake.
Always make sure you have a signed contract with your client before any new engagement. This will ensure that both parties are crystal clear on the terms of your agreement, the services you are going to provide, how much they will pay you, and what to do if there are any issues.
The bottom line?
You need a contract for three very good reasons:
Protect your business and assets
Clearly set out your terms for clients
What should a Service Agreement include?
There are a number of common clauses which we recommend you include in your T&Cs:
- Engagement and Term – acceptance of the agreement, the term of your services
- Scope – the scope of the services you will provide to the client
- Fees – how much you will charge, including any additional expenses
- Payment Terms – your payment terms, including how you will deal with overdue amounts
- Client Responsibilities, Warranty and Indemnity – what you need the client to do, plus important legal terms to protect you
- Works Standard and No Warranty – guarantee as to due care and skill
- Confidentiality – both parties agree to keep confidential information private
- Intellectual Property – this covers intellectual property rights for any works you create
- Limitation of Liability and Indemnity – to protect you against claims for losses and damages
- Termination – how either party can terminate the agreement
- Refunds – your refund policy (other than as required by Australian Consumer Law),
- Dispute Resolution – process to deal with any problems that may arise
- General – standard contract clauses such as Assignment, Severance, Entire Agreement, Waiver and Governing Law
Can I use a sub-contractor?
It depends on the wording of the Service Agreement.
You will need to include wording in the contract which allows you to subcontract the services you provide to the client. However, normally you will be the head contractor, and you will remain responsible for the subcontractor’s services.
How do you charge clients for a service?
Details about your fees, deposit required, payment terms and late fees should be clearly written in your Service Agreement.
It’s up to you to set your pricing and negotiate fees with the client you work for.
For a specific project, the client might like to have the cost certainty of a fixed fee, but it’s very common for service providers to charge out at an hourly or daily rate for regular work.
General Guidelines for Writing A Service Agreement
Here are some tips for a best-practice Service Agreement which is effective and user-friendly:
- Use the correct legal entities and ABN for you and your customer (if applicable)
- Use plain english language (not legal jargon)
- Make sure your terms are fair and reasonable
- Make sure your terms reflect your business practices
- Make sure your terms are consistent
- Keep them up-to-date!
Don’t do work for a client without a signed contract. Ever.
You might be alright..maybe...
But then again, you might not be.
Everyone wants to get paid.
Make sure you have a proper Service Agreement in your business and present a professional image to your clients.
They will appreciate the transparency, and it will also give you legal protection.
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