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By Sanjeev Kumar
Founding Attorney

Whether you are a service provider or a business hiring a service provider, you should be knowledgeable about what is in the proposed service contract. The service contract outlines the business relationship being established. It benefits both parties to be fully informed about what the service contract should include. The contract will help manage expectations on what will happen and what may happen during the course of the business relationship.

What Should Be Included in a Service Contract?

There are certain provisions that should always be included in a service contract. For instance, the parties to the contract should always be clearly defined. Whether a party is a business or an individual should be made clear. The type of business entity of either party should also be clearly identified. Another critical component to a service contract, also referred to as a “service agreement,” relates to payment. The agreement should clearly set forth how much is to be paid for services rendered, when payment(s) should be made, and how the payments will be made. Additionally, if the service provider requires a deposit, as it is in most cases, this should be specified in the agreement as well. The agreement should also specify what type of late fees will be assessed should payments not be received in a timely manner.

It is also important for a service contract to clearly set forth the scope of the services to be provided. The services that will be performed should be specifically detailed. The more precise the contract language is, the better. When services are broadly defined in the contract, this can lead to unmet expectations and contention. The service provider may not have expected for certain things to be included in the cost of the service and the business receiving the services may have expected for such services to be included. A specific description of service is one of the most critical elements of a service contract and should be drafted and reviewed with due care.

The service contract should detail under what circumstances the parties can amend the agreement and what needs to happen to allow for this to occur. Usually, the contract will specify that both parties must provide written consent to any contract amendments. Additionally, the contract should be clear on proprietary rights to anything that the service provider may create for the client. Depending on the nature of the services provider, proprietary rights may be worth a great deal and be very important to protect.

There should also be a dispute resolution provision. Should a dispute arise over the course of the business relationship, this provision details how the dispute will be resolved. It should state what laws will apply, where the dispute resolution will occur, and what type of dispute resolution will be employed. For instance, arbitration or mediation are common types of dispute resolutions provided for in service contracts.

Texas Business Law Attorney

Service contracts are often routine in a wide range of businesses. Do not let the routine lead to overlooking important details. A service contract is still legally binding and both parties to the contract will be subject to certain obligations. Know what you are getting into. The Kumar Law Firm can help draft these agreements in a way that is mutually agreeable to both parties. If you are concerned about a service contract you are contemplating entering into, we can review such an agreement to see if your best interests are being protected. For all of your business’s legal needs, the Kumar Law Firm is here to help. Contact us today.

About the Author
Sanjeev Kumar is the founder and principal at the Kumar Law Firm, which provides a wide range of legal services to entrepreneurs and business owners in the area of business & corporate law and intellectual property along with related areas of interest to clients such as business succession planning, wealth preservation through estate planning, and alternate dispute resolution.