No person or business does everything 100% on its own. Long gone are the days when you could do business with a handshake. Everything from having trash hauled away to getting a lawn mowed comes down to an agreement between two parties, and it’s best to have that in writing. The general jargon is all the same, with the specific services, prices, and parties being the main variants.
Types of Service Agreements
What is a Service Agreement?
A service agreement contract is a formal document that is used to expressly state the expectations and terms of an agreement between the parties involved. The general gist is that Party A agrees to provide the services in question to Party B in exchange for a form of payment. Oftentimes, these are services in exchange for money, but it is also possible to barter services in exchange for services and/or other goods.
For example, a home may opt to employ a full-time nanny. This nanny’s contract would offer nanny services to the home in exchange for a set amount of pay. However, the pay may be lower if the home offers a live-in option for the nanny due to the offset living expenses. All expectations of both parties would be detailed in the service agreement.
Unlike purchase orders or agreements, service agreements create a continual relationship between the parties for so long as the services are being contracted. These may be written to expire after a set amount of time has elapsed, after completion of a project, or left open indefinitely.
Service agreements are sometimes mistaken as a Contractor Agreement or Sales Contract, which both have different uses.
When To Use a Service Agreement?
Every time a task requires using someone for their services, or when your services are being requested for a project, there needs to be a service agreement.
Though many jurisdictions may allow for oral agreements, the inability to prove who said what makes most of them functionally useless in a court of law. Only agreements that can be verified can be enforced.
Having a service agreement actually benefits all parties – not just the one party who is seeking services (or the one offering them). Service agreements help to clarify precisely what is expected to happen and what is not expected, so that all parties are on the same page.
How To Write a Contract Agreement for Services
The main parts of any contract (offer, consideration, acceptance) are all featured in how to create a service agreement.
Step 1 – Date and Parties
A simple service agreement template usually begins with language determining the agreement’s beginning date.
The service agreement will then introduce each party, making it clear which party is performing the service and which is retaining the service.
Step 2 – Outline the Services Being Offered
The document will then go on to explain what the services being offered for this particular agreement include. ANY and ALL services that are reasonably anticipated should be covered. This helps lay out the responsibilities of the party providing the services, also making it clear what is to not be expected. (This is the offer portion of the contract.)
Step 3 – Compensation/Purchase Price
The next section of the service agreement will discuss compensation/purchase price. While it is most commonly money, it does not have to be limited to cash. Services may be offered in exchange for services, as well. It is also possible to offer services on a complimentary basis, with the agreement detailing limitations and cutoff dates.
Step 4 – Payment
In this section, outline how payment will be made. You can also include any details about previously paid amounts, down payments, or if the service will be paid for in installments.
Step 5 – Right of Inspection
If required, you can include a right of inspection section. Here you can clearly state whether there’s no right to inspection, or if the buyer is allowed to examine the final product or service. You can also include options for after an inspection, so requesting revisions or termination of the contract.
Step 6 – Assignment
In this section, you can detail whether the involved parties require permission to assign a third party.
Step 7 – Governing State
Here you should include what state the agreement shall be governed by. State labor laws may differ from one another, so it’s important to include the governing state – typically the one in which the work is taking place or where the service provider lives.
Step 8- Disputes
Detail how any disputes will be dealt with. Generally, the options for resolving any issues are:
- Court litigation
- Binding arbitration
- Mediation
- Mediation, then binding arbitration
Step 9 – Additional Considerations
Any additional considerations can also be included in the document, usually going after the items detailed above. This can include details of force majeure, limitation of liability, how billing is expected to be performed, as well as details of how the services end.
For example, a service agreement contract may be drafted to perform the one-time duty of completely designing and performing landscaping for a property being renovated. However, the owner may wish for the landscaping company to continue as the team who comes by weekly to tend to the new lawn and landscaping. The agreement can detail that this is a major one-time project that will turn into an ongoing lawn service project OR the parties can enter into separate service agreements for the two different duties.
Step 10 – Signatures
All agreements end with signatures from all parties involved. (This is the acceptance section of a contract.)
Service Agreement Sample
Below, you can download a free printable service agreement template in PDF or Word format:
Why Use a Service Agreement?
There are many benefits of using a service agreement, including:
Prevents misunderstandings
In the case of a dispute, a service agreement is a document that can be referenced. At the very least it lists the services that will be provided, the time frame in which they will be provided, and compensation details. Having everything written down and signed by both parties means everyone knows what’s expected. If a disagreement, dispute, or misunderstanding arises, then you can refer back to the service agreement. In serious disputes, the service agreement should have this covered, stating what course of action should be taken, such as court litigation or binding arbitration.
Saves money and time
Having a service agreement as a service provider ensures that payment details are clearly outlined, ensuring the buyer knows exactly what they need to pay and when. This helps prevent any confusion down the line and saves you from missing out on any money that you’re owed.
The time spent creating and discussing a service agreement will be significantly less than the time spent sorting out any misunderstandings that could occur without one.
Protects both parties
A service agreement protects both the service provider and the service receiver. The expectations of both parties will be outlined, including what should happen in case of a dispute and any deadlines for the service or payment.
Service Agreement FAQs
What to include in a service agreement?
In a service agreement you should include:
- Date entered;
- Names of parties;
- Services expected;
- Compensation;
- Extra details; and
- Signatures.
Can you write your own service agreement?
Yes, you can write your own service agreement. It is only suggested to do so if you have a strong familiarity with service agreements and their construction. It is better to use a service agreement template to make the process easier.
Does a service agreement need to be written down?
A verbal agreement may sound like enough, but it’s vital that you write out a service agreement. A written and signed service agreement protects both parties and can be used in court if necessary.
How do I terminate a service agreement?
Like most contracts, a service agreement may be terminated for a number of reasons. If any party breaches the conditions of the service contract, then it can be terminated. If either party sends a notice of contract termination to the other party within the agreed notice period, then it can also be terminated.