Marilyn Ries June 23, 2019 Service Agreement
Your form agreement should include a provision requiring that the client reasonably cooperates with your company. The client should provide whatever information or assistance the company might need in order to allow it to properly fulfill its obligations under the contract. Without the client’s reasonable cooperation, your company can’t be expected to fully or adequately perform. The client should be responsible for any damages suffered by the company as a result of its misuse or misappropriation of the services.
Both parties should be able to terminate for a material breach that is not cured within a specified period (usually 30 days). It is also common to allow one party to terminate if the other party becomes bankrupt or insolvent. Termination for convenience is more problematic, and may not always be appropriate. If the customer can terminate for convenience, consider whether there should be a cancellation fee to compensate for the loss of the bargain or to at least cover out-of-pocket expenses, or whether the customer forfeits any pre-paid amounts. Finally, clarify what obligations apply on termination – for example, the customer should immediately pay for services performed up to termination for which the service provider has not been paid.
Insurance clauses are not necessarily standard, but they are not unusual. Customers may wish to specify what insurance is required, and in what amounts, for comfort that the service provider can meet its indemnity obligations. If the agreement requires insurance, make sure the specified coverage and amounts are reasonable ($1-2 million general liability and errors and omissions should be sufficient in most circumstances). Review the insurance provisions carefully, and seek feedback from the insurer.
The service agreement should include a statement of work, which identifies the project’s scope and the respective responsibilities of you and your client. Oftentimes, if conflict arises it’s because the scope wasn’t properly defined, which led you and your client to interpret scope differently. Watch out for scope creep!