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What is a Service Agreement?
A Service Agreement is a written or verbal contract between a general service provider and a client or customer. It outlines the terms and conditions of their professional relationship, including details of the service provided, the parties involved, billing information, and more.
You can use LawDepot’s Service Agreement template for various purposes. Simply customise the document by answering our questionnaire, and we’ll generate a professional contract to suit your work.
We also supply templates for specific services such as:
Why should I use a written Service Agreement?
Although oral agreements may be enforceable, a written contract is often easier to prove and enforce in court.
Not only that, but you can decrease your chances of legal disputes altogether by creating a contract. This way, you can clearly define the expectations of both the client and the contractor. So, if a conflict arises, the parties can refer to the contract to help find a solution.
What’s more, a Service Agreement is evidence of the type of work relationship the parties have with each other. It’s crucial to differentiate contractors from employees, as they are treated differently by law.
Finally, depending on the nature of your business, it may be compulsory to create a Service Agreement that upholds international, national, and regional standards. As such, it’s crucial to check your local laws to confirm what’s required in your situation.
Is a Service Agreement legally enforceable?
Yes, Service Agreements are generally legally binding contracts, provided that they meet the essential elements of a valid contract.
In Australia, service contracts are governed by common law principles and statutes, such as the Competition and Consumer Act 2010. In the end, a contract’s enforceability depends on the nature of the agreement, the specifics of the situation, and the applicable laws in Australia.
Talk to a lawyer if you need to address a unique aspect of your contract.
How to write a Service Agreement
Create a Service Agreement by using our template. We’ll ask you for the following information:
First, specify how long services are needed (e.g., for a single job, a fixed term, or indefinitely) and where the work will be done (as this affects the laws that apply to your contract).
Next, clearly describe the service details (i.e., provide a scope of work). Remember: it’s crucial to be clear and specific when describing the tasks required. If possible, include important dates, project milestones, and a list of deliverables.
With LawDepot’s Service Agreement, you can list each service detail as a separate paragraph and they appear as a bullet point list in the document. While creating your contract, you can check the document preview to ensure it appears as you like.
2. Party details
Provide the contractor and client’s name and address. You can also specify whether each party is an individual or a corporation (which affects the format of the signatures at the end of the document).
3. Payment
Contractors can charge either a flat fee (payment due in full at a certain time) or a specific rate (e.g. hourly, daily, weekly). Factors that may affect a contractor's rate of pay include:
- The length of the project (whether it is a one-off project or ongoing)
- The skills required for the job (some contractors charge different rates for different skills)
- The scope of the project (additional projects may be added or removed)
Contractors may also require clients to pay a deposit before they begin any work. Usually, a deposit is within 10 to 50% of the total contract amount. However, this amount may vary depending on the stability of the client's financial situation and the degree of trust between the parties. The service provider might also prefer a deposit if there is a presence of rivals who may try to entice the client away with competitive prices.
To encourage clients to pay on time, contractors can set a reasonable time period for a client to pay an invoice (e.g., within 15 to 30 days of receipt). If payments aren't made within this time frame, contractors can charge contractual interest (typically no more than 10% per annum on the overdue amount).
Finally, LawDepot’s Service Agreement asks if you want to specify who will pay the superannuation guarantee contributions. Contractors who operate as a partnership or a company are required to pay the superannuation of their employees. However, sole traders are occasionally entitled to superannuation payments from their clients.
If a person works under a contract that is mostly or entirely for their labour, they are likely entitled to superannuation contributions. For example, imagine a pet sitter is hired to watch a client's dog while they’re away on vacation. The sitter is paid entirely for their labour (the time they spent taking care of the animal) and is therefore entitled to superannuation payments.
If you're unsure of the contractor's superannuation status, consult your local taxation office.
4. Terms and conditions
LawDepot’s Service Agreement asks you to address terms regarding early termination, reimbursed expenses, intellectual property ownership, and the duty of confidentiality.
Early termination
You can choose to allow either party to end the contract early. If so, you must specify how many days before termination that written notice should be given. For instance, one week's notice is generally accepted for most short-term contracts. But if a contract is ongoing, it's best practice to provide at least 15 to 30 days' notice.
If you have done any work or made any investment by the time the client issues the termination notice, you will be entitled to payment for such work or investment. LawDepot’s Service Agreement addresses this situation as such:
In the event that this Agreement is terminated by the Client prior to completion of the Services but where the Services have been partially performed, the Contractor will be entitled to pro rata payment of the Payment to the date of termination provided that there has been no breach of contract on the part of the Contractor.
Reimbursed expenses
Contractors may ask the client to reimburse them for reasonable, work-related expenses. It's common to establish the terms for reimbursement in your contract to avoid surprising the client with extra costs at the end.
You could include a term in your contract that requires the client to pre-approve expenses that meet specific guidelines. For example, if a client hires a handyman to do home repairs and electrical work on several rental properties in different locations, they may include a term in the Service Agreement stating travel, accommodation, and food expenses will be reimbursed up to a certain limit.
Intellectual property
Typically, any intellectual property created by an independent contractor is considered to be the contractor's property, unless otherwise specified in the Service Agreement. If the client holds the rights to the intellectual property, the contractor will only be allowed to use it for the purposes described in the contract.
Confidentiality
You can choose to impose the duty of confidentiality on a contractor indefinitely, until the end of the agreement, or not at all. The duty of confidentiality requires a contractor to refrain from sharing any confidential information (any data relating to the client that could be considered private or proprietary) for any purpose, unless the contractor is authorised by the client or required by law.
5. Final details
If your situation requires a term that we haven’t already addressed in the template, you can write your own unique clause. In this case, we’ll provide tips on how to phrase it.
Then, preview the document to see how your answers fit into the document and read through the other boilerplate clauses included in the template. If needed, you can use the document editor to delete or change items to suit your purposes.
What happens if one party breaches the Service Agreement?
A breach of contract occurs when either the client or the service provider fails to uphold their end of the agreement.
One reason a contractor might take a deposit is to protect against a situation where a client suddenly cancels without notice. Often, the existence of a signed contract is enough to ensure both parties act fairly and reasonably, whatever the circumstances. If not, a signed Service Agreement will assist a lawyer in upholding your contractual rights.
How do I cancel a Service Agreement?
Unforeseen events may require one party to back out of the agreement. This isn’t ideal, but you can prepare for it by including an early termination clause in your Service Agreement. This clause outlines what should happen if either party needs to cancel the contract early.