Kenneth Huizenga June 8, 2019 Service Agreement
Carefully review any representations and warranties requested by the customer to make sure the service provider can provide each one. Where appropriate, add knowledge, materiality, or other qualifiers to appropriately limit the scope of a representation and warranty. Only give limited performance warranties regarding the products or software provided (that originate from the service provider – the original supplier’s warranty should apply to third-party products).
A service agreement can be prescriptive and specify rights, responsibilities and obligations of the parties or can provide flexibility. In particular, in a service agreement it is particularly important to confirm whether the service provider can subcontract the services to a third party.
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.
A service agreement is an agreement made by two parties that documents the agreement between them with regards to the performance of the service(s) by one party (the service provider) to the other (the principal). Service agreements are very common and can be used in a wide variety of circumstances. They set out the fundamental terms of the relationship between the principal and service provider.