What they are and how they protect your business
A service agreement is commonly used to define the rights and obligations between a business and an independent contractor. As the name suggests, it is used for people requiring certain services from another.
We have all heard the horror stories, where a contractor does work for a business and when they send an invoice the business will no longer return their calls or emails for payment. Or, on the other hand, a business contacts a contractor who requests payment upfront, once paid they either take the money and run or provide only a “half service”, or attempt to outsource the service, without approval.
To ensure clarity and avoid would-be disputes, it is important to write up a service agreement with a qualified commercial lawyer. This way you can ensure your rights are protected as they understand what is required for an airtight agreement and can tailor the agreement to the specific relationship.
Clarity of the parties’ expectations of one another is one thing, importantly, a service agreement must clearly define the independent contractor relationship between the contractor and the business. Without this, the independent contractor may be defined as an employee, which can have significant implications for both parties.
Outlined below are key components included in a service agreement.
It is important to include what is expected of both parties and the nature of the services in the agreement to ensure clarity and avoid complications following a misunderstanding of obligations.
This section provides for confidentiality between all parties involved as often sensitive information is shared between businesses and independent contractors which would be detrimental if shared beyond that working relationship.
Liability and insurances
As the title implies, all liabilities, insurances, warranties and indemnities are to be included in this section.
Timelines and Termination
The duration of the contract needs to be specified in the document and any termination clauses that may apply due to obligations not being met.
This is one of the most important parts of the agreement as it will state how and when payment is to be made.
Independent Contractor Relationship
Clearly define the expectation that the parties are not entering into an employer/employee relationship. This will also come down to the factual nature of the relationship outside of the agreement, however, the agreement is the best place to start.
As all of these sections are dependent on the services and contractors that are being utilised, it is important that a new agreement is drafted for each independent contractor to avoid potential legal issues long-term. Grauf O'Brien Lawyers offer fixed price service agreements, so please give us a call to discuss your specific needs.