Owners of small businesses approach me from time to time to find out how to draft contracts that would regulate their interactions with their customers. It’s been my experience that small businesses that provide services do not need a lot of fluff when constructing contracts to meet their needs. Simple service contracts tend to be the easiest and fastest way to go when it comes to setting out the terms of engagement with customers and clients.
A service contract is a contract between a business and its clientele or customers. This contract outlines the terms and conditions of the services provided, inclusive of the particular work to be conducted, the amount and method of payment. It should, ideally, be in writing, with clear, simple, unambiguous terms/words utilised.
There are many advantages to having properly drafted service contracts such as, clarity with regard to the nature of the service being provided, time lines, roles and responsibilities, standards of performance, payment details as well as service location(s). These contracts also contribute to more certainty in the transaction as well as added trust in the customer/service provider relationship.
A basic written service contract, regardless of the field of work, should include the following:
- Official names, addresses and contact information of the parties involved (get copies of the parties’ government issued ID if possible)
- Clear, detailed outline of the service to be provided
- Service location(s) (if any)
- Timeline of service
- Payment terms, amount and method
- Any warranties* or guarantees *
- Indemnification terms*
- Non competition clauses
- Non-solicitation (non-poaching) clauses
- Non-disclosure, confidentiality clauses
- Dispute resolution mechanisms such as mediation, arbitration etc.
- Remedies for any breaches
- Termination clauses
*These should be drafted with care as there are laws that address the terms in these clauses. eg. The Consumer Protection and Safety Act ; The Unfair Contract Terms Act , The Sale of Goods Act (which refers to goods/products).
Anytime a business provides a service to a client, a service contract should be prepared, negotiated and ultimately signed by each party. Each party should retain a copy of the signed contract for their records. This formalisation of the business relationship helps the small business/service provider to protect their own interests and ensure that they are paid for the work performed, failing which the service provider is given a stronger basis upon which to pursue their compensation.
For customers, service contracts are also quite beneficial, in that, they provide a higher degree of certainty and protection by clearly outlining the scope of work, payment terms, timelines and personnel involved and a stronger basis upon which they could pursue their interests in the event that there is a breach of contract.
This being said, termination and dispute resolution clauses are especially important because they save the parties time, expense and stress later on if they are unable to fulfil their contractual obligations. These clauses should outline the conditions under which the contractual terms may re-negotiated, disputes may be resolved or the contract terminated and the remedies that would result.
A word of advice:
Always do a “reckie” (reconnaissance, background check) on any party with whom you may be entering into a contract. This goes for both customers/clients and businesses/service providers. This sort of due diligence goes a long way in preventing the stress, heartache and expense that arises when we do business with the wrong persons.
While the list of terms and information for inclusion in a service contract provided above is an exhaustive one it is not intended to be a substitute for professional legal advice when it is warranted. Remember to always seek professional, independent legal advice before signing any contract.
Good luck!
Phoenix Legal and Consulting Services 