Service Agreement Important Terms & Conditions

Introduction

We normally take so many services on a daily basis whether as an Individual or as an Entity (Partnership, Company, LLP, Society etc.) services can be of any kind i.e. Legal, Financials, Accounting, IT, Electronic, Banking, and professional services etc. further most of the time while taking any service, oral commitment doesn’t prove very fruitful and give arise to a legal dispute and in such scenario, it is advisable to have the term and condition of availing the service in black and white.

Here the document executed in such a scenario is called Service Agreement. Service Agreement is document between the service provider and the client. Under the Service Agreement, details of both the Parties i.e. Service Provider and Service Receiver, i.e. Nature of Service require, Scope of Service, professional Charges for availing Service, Duties of both the Parties, Confidentiality, indemnity, IPR  Arbitration and Jurisdiction etc., are to be mentioned carefully to avoid disputes and misunderstanding.

Further Terms of Service Agreement which needs to be taken care of are depicted below:

1. Appointment: The very first clause which needs to be mentioned is appointment of Service Provider by the Client for a particular work.
2. Scope of Services: The appointment should be followed by scope of services which are assigned to Service Provider and within which he is bound to act on behalf of his client.
3. Fees and applicability of Taxes etc.: The Service provider shall be entitled for remuneration against rendering of his services. The Client shall be responsible for making the payment duly on time. Further the details of taxes, if any, also needs to be mentioned, whether the Fee would be inclusive of such taxes or exclusive.
4. Term: The Term of the Agreement needs to be stated specifically like for what time period the agreement will be valid and under what time period Service Provider will complete its assignment.
5. Reimbursement of Expenses: Clause regarding reimbursement of expenses i.e. government charges, out of pocket expense etc needs to be mentioned specifically like whether that will be included under the fee or treated as exclusive.
6. Duties of Service Provider: The Agreement should provide for duties of the Service Provider. Like complete the work within the time frame, not to give any false statement, not to indulge in any wrong practice, work according to scope of work etc.
7. Duties of Client: The Agreement should provide for duties of the Client like to make timely payment, not to make any false statement, provide time to time desired information’s to the Service Provider etc.
8. Ownership of Documents: Any documents, records or materials prepared by the Service Provider while rendering his services to the Client shall be handed over to the Client. The Client shall be the sole owner of the same and Service Provider shall not claim his ownership.
9. Warranties and representation by the Parties: Clause pertaining to Warranties and representation must be mentioned under the Service Agreement like both the parties have the right to enter into this Agreement, both the Parties hold the licenses, registration and done all the compliance as required for providing and availing services.
10. Confidentiality: The Service Provider shall ensure that he shall keep all the confidential information provided by his Client in relation to this agreement as strictly private, regardless of the time whether provided before or after the date of agreement and shall neither use, divulge, report or reveal such information for any purpose even after termination of the agreement. It is very important to define the confidential information i.e. what type of information shall be construed as confidential. Confidential information can be any information related to the business of the Client but shall not be limited to accounting records, business records and client records and any other information received in good faith from the Client and release of such information can cause harm to the Client. However, information already in public domain or which is easily available to the public shall not be treated as Confidential Information.
11. Intellectual Property Right: All intellectual property and related information including trade secrets, goodwill, relevant registration and right in relevant patent, copyright, trademark shall and will be the Sole property of the Client. The Client can use the same without any restriction and the Service Provider shall use only with the written consent of the Client. For eg: The Client has provided a logo for trademark registration. On successful registration, the Client can use the said mark for his business purpose, but the Service Provider shall use only after obtaining necessary approval from the Client. And at the time of termination, shall duly hand over the said mark to the Client.
12. Indemnity: Under the Service Agreement, clause of indemnity play a very important role as it protect the Party from the wrong doing of other party under the Agreement. In case of breach of duty on the part of each Party, the Party committing the default shall indemnify the other party and make good the loss suffered E.g. suppose a person has provided professional advice on the basis of which other person has acted and consequently other person has faced legal actions and losses, now in such a scenario, other person may ask the first person to indemnify from the losses occurred due to its mistake.
13. Handover of Documents: Upon the expiry/termination of the Agreement, the Service Provider shall hand over all the documents, confidential information, records of the Client prepared on his behalf by the Service Provider.
14. Termination: Terms on which the agreement stands to be terminated shall be mentioned specifically in the Agreement. Few of the clauses can be:
    • on expiry of the term
    • on completion of service
    • on breach of duty
    • misuse of information and records
    • non payment of fees on time
    • abuse/insult of parties
    • continuous delay in completing the work etc
    • Further what would be the period of notice which needs to be served for termination of agreement must also be mentioned.
15. Miscellaneous Provisions:
    • Relationship: The relationship between the Client and Service Provider shall be defined. Whether it is of Principal to Principal basis or Principal to Agent basis.
    • Bribery:  Both the Parties should not support any type of corruption activities. The Client shall not pay a single paisa for such activities and the Service Provider shall ensure to do all acts only through legal means only.
    • Conflict of Interest: Service Provider must ensure that there is no conflict of interest while rendering its services to Client.
    • Notice: The Agreement should specify the address where each party shall send notices for communication so that necessary information can be delivered on time.
    • Severability: In the event any clause being unenforceable in whole or any part, for the time being, then all other clause shall remain enforceable and valid and unenforceable part shall be severed from the remaining of agreement.
    • Time is Essence: Time must be the essence under the Agreement. Means work must be completed within the time frame and not goes beyond that.
    • Assignment: Whether the assignment of work will be allowed or not this must be specified.
    • Waiver: Whether the waiver of any clause would be allowed or not this must be specified.
    • Modification: The Service Agreement shall be modified only with the mutual consent of the Parties.
16. Arbitration: In case of any dispute, the Parties can mutually agree to settle the dispute through arbitration also.
17. Jurisdiction: In case of any dispute arise between the Parties then what would be the jurisdiction. And which state of court shall be entitled to entertain the dispute, this must also be inserted in the Agreement.
18. Governing Law: what would be the governing laws for the Agreement whether it would be of India or of some particular state or of some other country.