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This information is not legal advice and is no substitute for consultation with an attorney in your jurisdiction. The law varies based on jurisdiction and time. Users are cautioned not to rely on this information.
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How Service Agreements and Service Level Agreements Protect Your Business
Services Agreements and Service Level Agreements which set forth
levels of service, can help clarify each party's goals, limit
the liability of the parties and ensure that both parties
get the services and payment expected.
Service agreements
and service level agreement legal forms by our Recommended Forms' Provider are
available for purchase here. These do not include the business terms to describe the services or service levels, only the legal terms.
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SERVICE AGREEMENTS AND SERVICE LEVEL AGREEMENTS |
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Services Agreements and Service Level Agreements should contain certain terms outlined below.
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Services |
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It is important to clearly define the services to be performed
and any deadlines for work product or performance. Without
clarity, each party, even in good faith, may have different
ideas and not discover this until the work is completed and
one party is not satisfied. The more detail stated in the
contract about the relationship, the less risk of misunderstanding
or unfulfilled expectations later.
Service levels to be designated for technical or other performance
should be set forth in an exhibit to the agreement and stated
in detail; these some times also include financial penalties
or rewards. There is no set formula for determining these
levels and numbers.
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Payment |
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The agreement should include a provision that states how
much is to be paid, when it is to be paid, what is included
in the payment (expenses, taxes, travel), procedures for invoicing,
and penalties for late payments.
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Relationship |
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The agreement should include a provision that clearly states
that the relationship is not a partnership, joint venture
or employer-employee. Since some of these relationships can
be implied by law, this is an important provision.
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Confidential Information |
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The agreement should include a provision stating that the
parties will exchange confidential information, how that information
will be identified and handled, restrictions on disclosure
and misuse, and exceptions to what is included in confidential
information. Depending on whether the agreement is for provision
of services or hiring of a service provider, and the party
drafting the agreement, the exceptions may be more broad or
more narrow
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Relationship |
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The agreement should include a provision that clearly states
that the relationship is not a partnership, joint venture
or employer-employee. Since some of these relationships can
be implied by law, this is an important provision.
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Ownership of Work Product |
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The service provider will want to make sure the agreement
does not include a provision stating that the customer owns
the work product, so that the Provider may continue to perform
similar services for other customers without the risk of legal
interference or restriction.
The company hiring a service provider will want to ensure
that they fully own the work product and that the agreement
contains the legal language as required by copyright law.
In either case, the owner of the work product, may agree
to give a license to the other party to address its needed
uses.
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Relationship |
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These may include the following or other warranties:
That the service provider will re-perform defective or
non-conforming services for a time period indicated
That the services will be performed at or above industry
standards
That the service provider will not infringe third party
rights in performing services
That the service provider is not violating any other agreement
by performing services
Which warranties and the number included will depend on whether
the agreement is drafted by the service provider or hiring
company.
The service provider should be sure to include the correct
legal language, in the correct font size (no I'm not joking)
to waive the warranties implied by the Uniform Commercial
Code. Despite its name, the uniform commercial code varies
by state, but generally is uniform nonetheless. The UCC implied
warranties include a that the item will do what it is intended
to do, that it may be fit for a particular promise if so stated,
that it does not infringe third party rights and that the
seller has proper title to sell the item.
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Indemnification |
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The hiring company should ensure that the agreement contains
a provision stating that the service provider will indemnify
the company for any breaches of the warranties. Indemnification
means that the provider will have to pay the company for any
third party litigation costs resulting from its breach of
the warranties.
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Liablity Limit |
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The service provider should include a provision limiting
its liability to the maximum amount it receives under the
agreement and for both direct and indirect damages. This wording
must be attorney drafted to be effective. Properly drafted,
this is an extremely beneficial provision to lower risk.
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Term and Termination |
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The agreement should include a provision that regarding how
long the agreement will be in effect, and the options and
results for termination.
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Insurance |
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The hiring company should require a minimum level of insurance
coverage from the service provider so that it can be sure
that any negligence or liabilities are financially covered.
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Force Majeure |
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The service provider should ensure inclusion of a force majeure
clause. Loosely translated from the French, this means a superior
force. A force majeure clause means that in the event of war,
acts of God, strikes, weather and other uncontrollable forces,
the parties are excused from performing.
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Non-Soliciation |
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To protect both parties, the agreement should include a mutual
restriction on each party soliciting employment from the employees
of the other.
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Conclusion
Service Level Agreements and Services Agreements which set forth
levels of service, can help clarify each party's goals, limit
the liability of the parties and ensure that both parties
get the services and payment expected.
Service agreements
and service level agreement legal forms by the author are
available for purchase here. These do not include the business terms to describe the service levels or services, only the legal terms.
Readers are cautioned not to rely on this article as legal advice as it is no substitution for a consultation with an attorney in your jurisdiction. Based on jurisdiction and time, the law varies and changes.
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