Top five most important items in your provision of services contract

Every contractual arrangement you have with your clients to deliver services is different.  This is based on a range of things like the type of service you are delivering, the obligations you have to meet when delivering those services and the risks that you have signed up to.  Here are a few areas in your contract that you should pay close attention when entering into a contract for the supply of services to customers.

1. Description of the Services

Make sure that you have properly described what it is that you are delivering to your customer.  Providing a comprehensive and detailed description of your services will avoid any disagreements and misunderstandings in the future.  How much detail you provide will depend on the complexity of your services.  A good way to think about it is to be clear about what your services will not include.

2. Responsibilities of the parties

Being clear about what each party is responsible for is also a key factor.  For example, is there something that your client is meant to do before you can deliver your services?  If so, what is it?  How will you know it has been done?  What are the criteria to determine that it has been done properly?  When will you need this to be done?  Similarly, if your services are dependent on the actions of a third party of which you have no control over.   You should make sure that you aren’t inadvertently liable for someone else’s problems.

3. Price and Payment 

Giving some thought to the price and the payment mechanism can sometimes be tricky.  The questions you should ask yourself include - What is the appropriate payment frequency?  Lump sum?  Instalments?  Annual Licence Fee? Access fee plus a % based on a number of users?  What are the most appropriate payment terms?  For example, given the type of services and the historical payment practices of your client, should you be imposing an interest on late payment? 

 4. Expiration and termination

A contract can expire naturally (for example when it is for a one-off service delivery), on the date in which the contract is noted as its end date or it can be terminated by a party.  Termination rights can exist for particular reasons (for example if there is a breach of the contract or if a party is insolvent).  Termination can also be done with notice for no reason at all.  These termination rights have to be listed in the contract.  When you are determining what is appropriate for your services, have a think about your particular services and your contractual obligations to deliver those services.  You should ensure that all the relevant reasons are included in your termination right.  For example if your services are dependent on your customer’s actions, if they are consistent in their delay, you might want a right to get out.  What happens after the contract ends should also be properly addressed – your right to be paid for work done and costs incurred, your customer’s obligation to cease using or accessing the services and to return all your property etc.

 5. Liability 

As a service provider, it is in your interest to limit your liability by excluding liability for any consequential losses, loss of profits etc, but to also cap your liability to a particular amount, often the fees you are getting.  In certain industries, it is also common to remove particular events from your obligation to compensate based on the loss or costs suffered, replacing it with a mechanism to calculate such loss or costs.  For example, if you are delivering technology related services, any defects in that service could be subject to a rebate scheme.  Another thing to consider including in your contracts is the requirement for the customer to actively do everything reasonable to limit the impact of that loss or costs.

 

If you have any questions regarding this article, please contact Source Legal Online at always@sourcelegalonline.com.au or 1300 609 450. 

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