What Is A Service Agreement?

A Service Agreement, otherwise known as T&Cs, is a contract between your business and your customer. 

It can take the form of a formal contract your customer needs to sign, an online tick box, or a form attached to your invoice and agreed to by payment. 

Here at Sprintlaw, we’ve drafted hundreds of Service Agreements for businesses from all walks of life. This is what you need to know about Service Agreements and how they fit into your business. 

Top Reasons Clients Want A Service Agreement

We’ve noticed a lot of clients contacting us for the first time requesting a Service Agreement, even though they’ve been in business for years. The main reasons they’re reaching out?

• Because a customer has refused to pay them, and there is no contract with the customer that clearly lays out the consequences for non-payment.
• There is an argument about the scope of services, with the customer wanting more done than originally agreed without paying more.
• There is a dispute with the customer, and it’s costing the business a lot of time and money to sort it out.
• The business is worried about liability.
• The business wants to protect their intellectual property.

Businesses short on time can get sick of chasing up payments and explaining their businesses policies again and again. A Service Agreement cuts this out, and can nip a potential dispute in the bud.  

10 Things To Include In A Service Agreement 

1. Scope

What exactly is the job? For example, if you’re installing blinds in a customer’s house and they change their mind after agreeing to a contract and want more work done, we can include a simple section to explain the extra costs for any change in scope. This means you don’t need a whole new contract each time there is a change in scope.

2. Term

How long does the contract last for? Is it for a one off transaction or is this a recurring business relationship? Does delivering new goods to your customers signify an extension of the contract if it was otherwise meant to end? The contract should also state the start and end date, and circumstances in which the contract will end.

3. Payment 

When is payment due? How will you be paid? What are the consequences for late payment? Is there any interest for late payments? Is there a deposit paid at the time of booking? This should be made clear and appear at the top of your Service Agreement.

4. Warranties 

What warranties, if any, apply to the goods or services you may be supplying or using?  Or are the warranties just the minimum covered by the Australian Consumer Law? You might also want to specify what happens if you’re using goods supplied by a third party.

5. Customer’s Obligations

So that you can deliver your services in a timely manner, you may need your customer to do certain things by a set date. For instance, if you are a software developer, to deliver a project on time you might need the customer to approve certain stages of software development to get to the final product. 

This can be difficult if your customer is not getting back to you in a timely manner. The customer might have other obligations too, such as giving you access, passwords and all the information you need to develop their software.

Other examples of obligations are as simple as the customer obeying the law—something which might seem obvious but can be important in contracts where you’re hiring out vehicles or hiring out potentially dangerous equipment.

6. Intellectual Property

Often, businesses will give their customers material they themselves have created and do not want other businesses copying or using. A good Service Agreement should cover all the aspects of intellectual property relevant to your business, including third party intellectual property

7. Liability 

What if something goes wrong or someone is injured? For instance, let’s say you’re a professional photographer and someone trips on your equipment, or your equipment stops working and you fail to capture what you said you would film.  Or you’re hiring out your equipment, and the customer breaks it or allows it to be stolen. Who will be liable and how does insurance play into this?

8. Dispute Resolution

If there is a dispute, this section will guide what you and your customer have to do first. For example, your Service Agreement might state you have to go to mediation before going straight to court.

9. Termination  

This sets out the circumstances the business or the customer can terminate the contract, and the effect of termination. For example, if you are renting out machinery, it might set out in your Service Agreement that, upon termination, any equipment you rented out has to be returned, and rental payments until the date of termination still need to be made. 

10. Force Majeure

In light of the recent bushfires and COVID-19, we’ve had a spate of businesses contact us to clarify whether the force majeure covers pandemics and bushfires. The Force Majeure clause should outline exactly what counts as a force majeure, and what happens when obligations are unable to be fulfilled because of force majeure.

What Next?

It’s important that your Service Agreement complies with the Australian Consumer Law, is straightforward and unambiguous, and is in a format that is simple and easy to understand from a customer’s point of view. 

Here at Sprintlaw, we specialise in this type of agreement, and have helped hundreds of businesses with a tailored Service Agreement. Don’t hesitate to reach out to us on 1800 730 617 or at team@sprintlaw.com.au for a free, no-obligations consultation.

Justine Wu

Justine is a legal consultant at Sprintlaw. She has experience in civil law and human rights law with a double degree in law and media production. Justine has an interest in intellectual property and employment law.