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Service Agreements Explained

By: Garry Crystal - Updated: 18 Aug 2016 | comments*Discuss
 
Service Agreements Contracts Breach

Professional service agreements are vital business tools that are used to clearly set out the expectations and requirements of both the person supplying the service and the customer. Problems can occur with the service provider/customer relationship if clearly defined service agreements and contracts are not set in place.

The Need for Service Agreements

Although verbal contracts are considered binding, the safe approach is to set out the terms and conditions of any service agreement in writing. In most cases the company providing the service will be the one making the offer and the customer will be the one to accept and remunerate the service provider.

Service agreements are particularly helpful to the customer to ensure that they get the service they have paid for, on time and in full. If there are disputes over the agreed service then the contract can be used to clarify the dispute through reference to the terms and conditions.

Terms and Conditions

The service provider will usually be the party who provides the contract and with it will come a list of terms and conditions. These terms and conditions, sometimes known as contract clauses, will clearly outline the requirements, expectations and obligations of both parties. Service agreements should be carefully read before any agreement is concluded.

If any of the terms and conditions are unclear in the agreement then do not sign. It is a legal requirement for any clauses to be intelligible and easily understood by the customer. If any of the clauses are unclear then the contract may not be enforced in a court of law if a dispute arises.

Service Providers

Service providers come in all shapes and sizes. From the company that delivers milk to the doorstep to the energy supplier that provides electricity and gas to businesses and homes. There will be different levels of detail in each contract and different levels of leeway also provided. For instance, a company supplying products to another business may have to meet strict deadlines, and missed deadlines could cause a financial loss to the company who is paying for the service.

Clauses in the service agreement may be set in place that outline a financial compensation requirement if the deadlines are missed and a breach of contract occurs. One of the most damaging aspects of this type of breach could be the loss of good faith and trust between service provider and customer.

The Service Agreement

Service agreements come in many different forms, and the detail that goes into an agreement may differ depending on the service provided. However, there are a few details that are commonly used within all service contracts. These will include:

  • The names and addresses of both parties.
  • Description of the services provided.
  • Definitions of terms used within the agreement.
  • Payment terms and frequency of payment.
  • The obligations of the provider and the client.
  • Confidentiality clauses.
  • Renewal clauses.
  • Signatures and witness signatures if needed.
  • The date.

Customer Protection

Consumers have a great amount of protection set in place when it comes to service agreements. There are numerous consumer laws that apply to a service provider on how they can and cannot act with customers. These laws are designed to protect the rights of consumers from unfair terms and conditions, and to protect the consumers from companies that act in bad faith. An unbalanced service agreement that is written in favour of the service provider may not be enforceable in a court of law.

Service Providers without Contracts

It is always wise to have a service agreement or contract in place. If a company is providing a service and does not offer a contract then the customer should request one. Doing this will give the customer basic consumer rights and there be a point of reference if disputes occur over the service provided. Customers should always be wary of service providers, such as landlords, who do not offer contracts or agreements when offering a service.

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Share Your Story, Join the Discussion or Seek Advice..
@MarkM - I think you need to read your contract thoroughly and see whether you have actually breached the contract (and to ascertain whether the contract is purely about maintaining the hardware and whether it includes replacing the hardware also).You say in the contract terms that you could have terminated the agreement by putting it in writing, by registered mail, which you haven't done; would this have excluded you from the termination charge? Without seeing the contract we can't really give advice and really I think you need to see a solicitor on this matter.
ContractsAndAgreements - 13-Mar-15 @ 10:03 AM
I have an service contract with a company to maintain some hardware. The contract still has several years to run. Recently I asked the service company for a quote for replacement hardware and for a service agreement on that new hardware. What they quoted was massively overpriced, so I told them in no uncertain terms that if I did change the system, I wouldn't be doing so with them! However, since rejecting their proposal, the service company say that thisterminates the existing contract and they will be invoicing us for a termination charge for the remaining years of the contract. The contract terms clearly states that if I wanted to terminate the contract, I'd have to do so in writing, by registered mail, which I haven't done. There are no terms that define how the service company can terminate the contract. To be honest the relationship between us has broken down and I'd prefer not to deal with them any longer, but surely they can't impose a termination charge when we haven't initiated a the termination? Are they in fact in breach of contract by trying to say we've terminated?
MarkM - 11-Mar-15 @ 1:57 PM
I have an service contract with a company to maintain some hardware. The contract still has several years to run. Recently I asked the service company for a quote for replacement hardware and for a service agreement on that new hardware. What they quoted was massively overpriced, so I told them in no uncertain terms that if I did change the system, I wouldn't be doing so with them! However, since rejecting their proposal, the service company say that thisterminates the existing contract and they will be invoicing us for a termination charge for the remaining years of the contract. The contract terms clearly states that if I wanted to terminate the contract, I'd have to do so in writing, by registered mail, which I haven't done. There are no terms that define how the service company can terminate the contract. To be honest the relationship between us has broken down and I'd prefer not to deal with them any longer, but surely they can't impose a termination charge when we haven't initiated a the termination? Are they in fact in breach of contract by trying to say we've terminated?
MarkM - 11-Mar-15 @ 10:22 AM
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