What's in a Services Contractor Agreement?

By Chris Combs

If you are performing a paid service for someone or paying them to perform services for you, you'll need an enforceable agreement that the services contractor can follow in return for timely compensation. This overview is not meant to serve as legal advice but can offer a handy FAQ sheet and checklist. Read on to consider the reasons you might need a services contractor agreement, and what to put in it.

The services contractor agreement: who needs it? 

A services contractor agreement becomes a key part of running a service business. A service involves an applied skill, as distinct from the selling of tangible things.

When the service provider gets a request to carry out work for a person or a business, both sides of the relationship need to set forth their terms and expectations before the project begins. Using the term "service contractor agreement" in the header makes it clear that the service provider is not an employee. Additionally, the agreement can help prove claims if a later dispute cannot be resolved amicably by the parties. (Have your agreement specify which state's law will govern its terms; that's called a "choice of law" provision.)

Yet if the parties enter the agreement in good faith, a well-written agreement will help both sides avoid or resolve any misunderstandings. So, write the agreement with clarity, and attend carefully to its terms.

What is the purpose and benefit of the service contractor agreement?

The agreement can smoothly guide a project. It protects the client who needs a service and the provider. Essentially, it gets everyone on the same page and holds both parties to predictable terms.

When questions pop up about what works to include (or not), referring to the agreement can avert serious misunderstandings that would otherwise sour a working relationship.

What basic elements make up a service contractor agreement? 

The agreement should list names and contact details for both the service provider and the client. Both parties sign and date the agreement. They should include the effective date for the contract, too.

The agreement details the services to be carried out, and who pays for any expected or unexpected expenses. Use it to create deadlines for the entire work and, if appropriate, completion of specific phases.

The parties should state their payment terms, precisely and transparently. Payment may occur up front (and the service provider can offer a discount for full or partial up-front payment). Otherwise, key payment deadlines may relate to the start or the completion of each phase of the work.

The agreement should also specify who will perform the service. Must a particular individual perform or oversee the work? Lay out exactly what (and who) the parties expect to deal with as the project unfolds.

How does the agreement honor the interests of the business being served? 

The business requesting the service will communicate the approach that best suits its customers and marketing objectives. A well-tailored contractor services agreement also refers to the confidentiality needs of the business. Sensitive information can include:

  • proprietary ideas and methods;
  • trade secrets;
  • internal communications;
  • financial information; and
  • identities and contact information for donors, customers, and other contractors.

The client should explain its expectations of privacy and the service provider's duty to protect the client's intellectual property and confidential assets. If the service provider must use proprietary materials, write down the timing and manner of their proper return or deletion.

The service provider will typically assign to the client the rights to any inventions or work done for hire.

Do include clear, strict terms under which the parties may modify or cancel the agreement. And explain that it automatically terminates under extreme circumstances (such as the death, closure, or bankruptcy of a party).

The whole idea is to keep both sides satisfied.

Create a service contractor agreement to troubleshoot your business relationship in advance. This will establish a pattern to guide your success and satisfaction in future projects.

Note: You should not rely upon this information as legal advice. Seek advice from a lawyer licensed in your state.

Topics: Resources