Service Agreements refer to an agreement between parties for the purpose of providing and receiving service, whether one-sided or mutual exchange of services between the parties. Service agreements are focused on providing the specifications of service, standards of such service, delivery schedule (if any) and payment thereof. “Master Service Agreement” or “Service Level Agreement” are the most common names for service agreements that are found in the industry.
It may at first thought seem that service agreements should be straight forward, however, just as with every other contract, service agreements too require a close review in order to ensure that everything is as desired.
Pointers
1. Description of services
The clause focuses on laying down the details of type and method of performance of service. It is important to note whether the details of the service as laid down are as decided and desired or not. It is important to ensure that the scope of the service meets the ability of the service provider to provide such service as well as the requirement of the service availer. The specifications of service to be provided and availed also includes the schedule agreed between the parties for the purpose of such service.
2. Confidentiality
In the event that due to the nature of services, the parties wish to keep the performance of service confidential, there is a confidentiality clause. This typically also involves the duration of confidentiality and/or manner of disclosure of service. To understand it better, let’s take the example of software development. A major company developing a new product has taken the service of another software company to do the initial build-up of the software for them. Since the product is new, the major company wants that till the product is launched into the market, even the information of the initial build up is kept confidential in order to allow for the company to plan the launch of the product with more precision.
3. Standards of service
The extent, manner, intended purpose etc. of service are considered in order to prepare the standards of service. The standards of service can either be strict or allow some variation. Wherever, variations are allowed, the specification of any variation may or may not be provided. Hence all information provided, whether expressly or impliedly, should be closely reviewed in order to ensure that the contents of the clause are as decided between the parties.
4. Liability for damage to property
During the performance of services, owing to the nature of the service to be provided and performed, it might include possibility of damage to property of either party. Hence, in the event of such possibility or even requirement, as the case may be, defining the liability for any damage caused to property by either party shall ideally be present in an agreement. Needless to say, blanket liability of one party is an extreme type of such a clause, and should thus be carefully reviewed.
5. Service Follow-up Period
The nature of service and/or the requirements of the agreement may require the service provider to further provide follow-up services with respect to the services already performed and/or completed. This may be included in the agreement to ensure that the scope of services are fully catered to. Another reason may include to provide any ancillary services with respect to the services performed, which were not specifically included in the agreement between the parties. Another important element to note here is the duration of service follow-up period and whether the follow-up services are to be considered as part of the services already performed/completed for the purpose of payment.
6. Payment
The payment clause can be of different types. Most common ones are one-time complete payment and payment as per the payment schedule decided by the parties in the Agreement. Payment schedule often corresponds with the delivery/completion of a portion of service. Hence, it is important for the parties to the contract to ensure that the payment details i.e. the amount, the date(s) of payment and all corresponding details including delivery and completion of service are as decided between the parties.
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Conclusion
The entire focus in order to review a service agreement should be whether the details contained therein are as desired by the parties and possible for the service provider to actually perform and complete. This focus is related to both the scope of service and schedule of delivery and completion of the service. Along with the other general details of a contract that everyone should be mindful of, the above particulars are of equal importance in a service agreement. The list however is not exhaustive and important clauses in a contract entirely depend upon the nature of a contract and hence, general due diligence should always be applied.
