What are the 5 main topics to have in mind when celebrating contracts with service providers?
Before entering this article’s core, it is important to understand what is a services agreement.
A services agreement is a binding legal document that establishes the terms and conditions of a service.
When drafting this type of document, there are a few things to bear in mind to avoid inconveniences and misunderstandings that can harm your business.
Below we will list the five main topics to have in mind when celebrating a services agreement with service providers.
1. Scope of services:
If we have to elect “the” main topic of your services agreement, this would probably be the one. Describing the service scope should be the first concern when drafting the services agreement, as this will delimitate and orientate the services. In this topic, you will not only describe the services that will be provided, but you can also expressly determine which services will not form part of the contract.
After determining which services will be part of your agreement, the price is another essential topic.
- How will this payment be made? A single payment? Installments?
- Will the payment be made upon contract signature contract? Or upon completion of each phase of the service?).
- It is also important to consider the penalties in case the payment is not processed on time.
The clearer the rules are, the better for both parties and the more confidence you have during negotiation.
The ideal services agreement should include a topic regarding the rules in case of termination. In the event one of the parties wishes to terminate the agreement, it has to be clear how the notification of termination is processed. These are important questions to draft this topic.
- What is the minimum notice to be provided?
- Can this notice be verbal or only in writing?
- What are the implications for terminating the contract?
- What payments must be made in the event the service is not completed?
4. Confidentiality and Intelectual Property ownership:
Defining the rules regarding confidentiality and Intellectual Property (IP) ownership can protect your business. When a client hires a service provider, confidential information can be necessary to design the service and inform what is needed. To avoid leak or misuse of any essential information, a confidentiality clause must be included in your services agreement and the following questions should be taken into consideration:
- What is considered confidential information?
- Who are the recipient and the discloser of this information?
- Which information can the recipient disclose to third parties?
- What are the responsibilities and obligations regarding confidential information?
The same importance relates to IP ownership. When the service is complete, it is important to establish who will be the final product owner and to which extent this ownership applies.
5. Choice of law and jurisdiction:
That is an important topic that is only valued when a disagreement arises. When celebrating a services agreement, especially with a service provider based in a different country, choosing the applicable law and jurisdiction can avoid uncertainty and facilitate solving the dispute in case something goes wrong. Selecting an alternative dispute resolution instrument (i.e., arbitration) can also be a good alternative.
Note: Please note that this post is informative only and is not the author’s intention to exhaust the subject referred to herein. This post is not a legal consultation, and for proper legal advice, we advise you to consult a lawyer of your trust.
Renata Frota – VectorB2B – Drug Development Lawyer