How to Draft a Service Agreement

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Service Agreement

What is a service agreement?

A service agreement is usually just a contract between two parts for the provision of a service in exchange for payment. Sometimes a service agreement is referred to as a ‘service-level agreement’ (SLA) is a part of a service contract where the level of service is formally defined.

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Some tips in relation to creating a service agreement:

1. Be prudent – generally speaking, the dangers of not having a contract are greater than the dangers of having one.

2. Keep it simple

A) Come to a general meeting of the minds, and write down your understanding in brief, simple bullet points. Ask the other party to do the same.

B) Be sure to include the following elements in your bullet points:

a. Name the parties, whether they are individuals, groups or companies, and their physical addresses.
b. Establish the duration, stating beginning and ending dates
c. State the basic term(s) of the agreement, usually that one party is hiring the other party to perform certain duties.
d. Define the duties to be performed.
e. State the expected completion date of the duties, any penalties to be imposed if the date is not met, and any incentives for early completion.
f. Document the agreed upon amount of compensation, whether it’s hourly or project-based, and whether any portion is paid in advance.

i. Document who is responsible for taxes
ii. Define whether a W-2 or 1099 will be provided
iii. Include your social security or tax identification number
iv. List any reimbursable expenses

g. Define the status of the person performing the work, whether they are acting independently or as a representative of the hiring party, and to what extent.
h. Define any warranties related to the quality of the work and the extent of any liability
i. Include any other pertinent points applicable to your agreement. Examples may include:

i. How conflicts will be resolved
ii. How to amend the agreement
iii. List the state(s) whose laws govern the terms of the agreement

3 Compare versions with the other party, looking for 2 things:

A) Did the other party include any pertinent information that you left out? If so, add it.

B) Did the other party include anything that you object to? If so, have a conversation and modify that point.

4 Write a draft, share it with the other party, and ask if they have any final edits. If they do, refer back to Step 3, and incorporate the edits as appropriate.

5 Hold a signing meeting.

A) In the presence of a witness. Bring one copy of the agreement for each party.

B) Each party should sign each copy of the agreement

C) Signatures should include:

a. Printed name & title of each party, including a witness
b. Handwritten signature and date

D) If there are any last minute revisions at the signing meeting, they should be handwritten into each copy, initialed and dated by each party.

6 Each party should leave the meeting with an identical, signed original contract. Keep it in a safe place!

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