A service agreement, also called a service level agreement or SLA, is used as part of a service contract. In a service agreement, the level of service that a customer can expect to receive is defined. Service agreements include a wide range of important information regarding the agreement that parties are entering into and should be written and read carefully by all parties as they are legally binding.

Some of the items that a service agreement typically includes are:

A Description of Services

This portion of a service agreement should clearly define the services that the client can expect to receive. The description of services will often contain the scope of the work or service to be performed, a time frame for completion, and other details regarding the work to be performed or the service to be delivered. Itâ€™s important that this section is complete and clear as many disagreements result in one or both parties misunderstanding expectations.

Payment Information

This is an extremely important portion of a service agreement. In this section, the amount of payment should be clearly stated, as well as when it is to be paid, what it includes, and the penalties for paying late or not paying at all.

Confidential Information

A service agreement should clearly define what is considered to be confidential information and how it should be handled. Exceptions to whatâ€™s considered confidential information, how the information will be transferred, and the the consequences for misuse of confidential information should all be explained in this portion of the agreement.

Relationship of the Parties

In a service agreement, itâ€™s important to formally state the relationship between the parties entering the agreement. Most agreements will state that the relationship is not a partnership or employer-employee relationship. Since these relationships can often be implied, itâ€™s important that these relationships are clearly defined to avoid issues later.

Representations of Work and Warranties

A very important section of a service agreement, the representation of work and warranties explains what, if anything, the service provider is warrantying and how warranties will be handled.

Ownership of Work

This portion of the service agreement defines who owns the work. For example, a service provider may want to include a provision that the customer does not own the work so they can continue to provide the same work for other customers.

Indemnification and the Limit of Liability

The client typically wants to ensure that the service provider will indemnify them for breaches of any warranties. This means that the service provider will pay the company for any third party lawsuits that arise as a result of the breach of the warranty.

The limit of liability often states that the service provider can not be held responsible for costs above the amount it received as part of the agreement. This portion of a service agreement is extremely important and is typically written by an attorney.

Term and Termination

This portion of the service agreement states how long the agreement will be in effect and how it can be terminated.

Details of Insurance

The client often wants to receive insurance from the service provider to cover possible liabilities. This portion lays out details relating to insurance.

Force Major Clause

The Force Major clause is used to state that the service provider does not have to perform their work when faced with uncontrollable circumstances such as acts of God, weather, war, and other circumstances outside of their control.

Rules for Non-Solicitation

This section is typically included so that neither the service provider or the client attempt to solicit the services of the otherâ€™s employees.

A service level agreement is an important legal document that protects both service providers and clients and ensures that all parties are on the same page regarding expectations and responsibilities. Properly written, these agreements will help to ensure a smooth relationship.

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