Outline the terms of services from one party to another with our service agreement.
Updated May 28, 2024
Written by Sara Hostelley | Reviewed by Brooke Davis
A service agreement is a contract that outlines the agreed-upon services and compensation between two parties. It helps prevent misinterpretation and establishes a clear understanding of obligations and responsibilities.
No person or business does everything 100% on its own. Everything from having trash hauled away to getting a lawn mowed comes down to an agreement between two parties, and it’s best to have that in writing. The general jargon is all the same, with the specific services, prices, and parties being the main variants.
A service agreement is a formal document used to expressly state the expectations and terms of a contract between the parties involved. The general gist is that Party A agrees to provide the services in question to Party B in exchange for a form of payment.
Often, these are services in exchange for money, but it is also possible to barter services in exchange for services and/or other goods.
For example, a home may opt to employ a full-time nanny. This nanny’s contract would offer nanny services to the home in exchange for a set amount of pay. However, the payment may be lower if the home provides a live-in option for the nanny due to the offset living expenses. All expectations of both parties would be detailed in the service agreement.
Unlike with purchase orders or agreements, you create a continual relationship between the parties as long as the services are contracted. These may be written to expire after a set amount of time has elapsed, after the completion of a project, or left open indefinitely.
Service agreements are sometimes mistaken as contractor or sales contracts with or sales contracts, which have different uses.
A service agreement needs to be in place every time a task requires using someone’s services or when your services are requested for a project.
Though many jurisdictions may allow for oral agreements, the inability to prove who said what makes most of them functionally useless in a court of law. Only agreements that can be verified can be enforced.
A service agreement benefits all parties – not just the one party seeking services (or the one offering them). They help to clarify precisely what is expected to happen and what is not expected so that all parties are on the same page.
There are many benefits of using a service agreement, including:
In the case of a dispute, a service agreement is a document that can be referenced. At the very least, it lists the services that will be provided, the time frame in which they will be provided, and compensation details.
Having everything written down and signed by both parties means everyone knows what’s expected. In serious disputes, the service agreement should cover the action that should be taken, such as court litigation or binding arbitration.
A service agreement as a service provider ensures that payment details are clearly outlined, providing the buyer knows exactly what they need to pay and when. This helps prevent confusion and saves you from missing out on any money you owe.
The time spent creating and discussing the document will be significantly less than the time spent sorting out any misunderstandings that could occur without one.
A service agreement protects both the service provider and the service receiver. The expectations of the parties will be outlined, including what should happen in case of a dispute and any deadlines for the service or payment.
The main parts of any contract (offer, consideration, acceptance) are all featured in a service agreement:
A contract template usually starts with language determining the agreement’s beginning date. You will then introduce each party, clarifying which party is performing the service and which is retaining the service.
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The document will then explain the services offered for this particular agreement. ANY and ALL services that are reasonably anticipated should be covered.
This helps lay out the responsibilities of the party providing the services, also clarifying what is not to be expected (This is the offer portion of the contract).
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The next section of the service agreement will discuss compensation/purchase price. While it is most commonly money, it does not have to be limited to cash.
Services may also be offered in exchange for services. Complimentary services are also possible, with the agreement detailing limitations and cutoff dates.
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In this section, outline how payment will be made. You can also include details about previously paid amounts, down payments, or if the service will be paid in installments.
If required, you can include a right of inspection section. Here, you can clearly state whether there’s no right to inspection or if the buyer can examine the final product or service. You can also include options after an inspection, requesting revisions, or terminating the contract.
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In this section, you can detail whether the involved parties require permission to assign a third party.
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Here, you should include the state by which the agreement shall be governed. State labor laws may differ, so it’s essential to specify the governing state—typically, where the work occurs or where the service provider lives.
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Detail how any disputes will be dealt with. Generally, the options for resolving any issues are:
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The document can also include additional considerations, usually following the items outlined above. This can include details of force majeure, limitation of liability, how billing is expected to be performed, and how the services end.
The service agreement can detail that this is a significant one-time project that will turn into an ongoing lawn service project. Alternatively, the parties can enter into separate contracts for the two different duties. For example, to perform a one-time landscaping job for a renovated property that will turn into weekly visits to maintain the lawn and the landscape.
All agreements end with signatures from all parties involved (This is the acceptance section of a contract).
