To simplify your service agreement, it can incorporate the likelihood that there will be multiple projects in the future. In these cases, you can construct your service agreement to anticipate work orders (or statements of work) that will be attached in the future.
Regardless of the contract structure, however, all service agreements should address the ten important issues discussed below. Note that this article is written from the service provider’s point of view – customers reviewing service agreements may be concerned about different issues, and may have different perspectives on the issues.
When preparing a contract, parties often underestimate the importance of correctly defining the parties. For a variety of reasons, the recitals (the introduction) to a contract should clearly reflect whether each party is an individual or a business entity and provide any other relevant identifying information. For example, individuals and business entities face different exposure to liability and must be approached differently in the event of a future claim or dispute. Companies should indicate their state of formation and entity type (whether it’s a corporation, limited liability company, partnership, or the like). Properly defining the parties also provides you with the information you need to perform basic research (due diligence) on each other.
Clearly set out the invoicing and payment terms. The service provider should not wait until the end of the assignment or agreement to invoice the customer, but should bill on a monthly basis or upon achieving certain milestones. Billing on a timely basis will help cash flow and establish expectations. Requiring an up-front deposit will also help with cash flow, and will help screen out customers who are unlikely to pay in the end. Also, be clear about what additional expenses (third-party assistance, travel, accommodation, etc.) the customer is expected to bear. The service provider should require payment within, for example, 30 days following the invoice date.
Clearly identify the services that the service provider will provide and any specific deliverables or end results, as well as any interim or final timetable or delivery schedule. If necessary, clarify whether the service provider will be creating or developing all of the deliverables, or whether some deliverables will be third-party equipment or software. Also clearly identify all applicable specifications, metrics, key performance indicators and service levels, so that deliverables and performance can be measured against objective goals
Businesses often use MSAs to help make contract negotiations simpler. This agreement lets both companies spend their time discussing the terms of the deal. Then, they can proceed with the work outlined in the agreement. If you don`t have an MSA, the customers and the company can still work through issues, but there are big concerns that might derail the contract. Having an MSA before having a specific contract lets companies focus on what their particular contractual issues are, such as the time frame and the price, for when the contract actually arises.