In the aftermath of COVID-19, many small businesses are making necessary pivots to their business model in order to stay afloat. They are changing their typical services to adapt to the new reality of temporary business closures, restrictions on travel, and stay at home orders. If you are one of those business owners making the necessary adjustments to your business model, make sure your service contract still protects you by spelling out the terms clearly.
In these times, remember the basics: A services agreement is important because it allows the parties to have an understanding of the deal, expectations, and how issues that may arise are to be handled. Like any contract, the service agreement must be clear on the fundamental business terms. Who is doing what, and when, where, and how are they doing it?
Beware, services agreements differ depending upon the industry and business, and that’s why you should seek guidance from an attorney. At a minimum an effective services agreement must include the following 10 things:
- Scope: What are the basic details and expectations of the contract? This is so important to get right, so don’t skim over expectations or you may end up with a problem commonly called scope-creep.
- Timing: When does the work start and finish? What will happen if there is a missed deadline? It is a good idea to build in some protection that the service provider is not in breach due to a missed deadline caused by the customer (for example, by the customer’s failure to provide timely information or instructions on how to proceed).
- Terms: How much are you being paid, and when and how are you receiving the payment.
- Responsibilities: What is expected of all the parties involved?
- Termination: Who can terminate, for what, and what happens if a party terminates.
- Breach provisions: If someone breaches the contract, what happens next? Can you go straight to court or must you arbitrate? Are there formal notices that you must give upon a breach, is there a mandatory time allotted for the breaching party to remedy the breach.
- Waivers and disclaimers: Vary from industry to industry and is personal to your business.
- Warranties: Varies from industry to industry.
- Legal venue: Depending upon the location of the business, this dictate where any legal action would take place should a problem arise.
- Intellectual property and confidential information: Other considerations include protecting your intellectual property (IP) and confidential information. This is necessary if the service you are providing would lead to parties exchanging IP or if the customer is paying the service provider for the IP to be developed. If the parties will be exchanging or will have access to confidential business information, include provisions about the protection and use of that confidential information.
Very frequently there are industry specific laws that require certain language to be included in a services contract, so again, it is always best to speak with an attorney about drafting a customized services agreement that is tailored to your business and protects your specific business interests. Contact Wick Law today for a services contract review or overhaul.