When owning a business, it is often necessary to use something called a Service Agreement. A Service Agreement is a legally binding contract used between two businesses, or one business and an individual. For example, a business may use this type of legal contract when hiring out landscaping, work on their building, or a temporary consultant.
The service agreement is structured as an outline of what each party must do. This could include the following:
If necessary, the document can also include warranty or indemnity clauses. These clauses can be useful to ensure that the specified party is protected from potential losses or damages.
Another type of service agreement is referred to as a Product Service Agreement, otherwise known as an extended warranty. This is similar to a basic warranty, but differs because it is sold separately from the product itself and may provide more coverage or repairs over a longer period of time.
Creating a clear description of what will be included in the service from the beginning can prevent misunderstandings between the two parties in the long run. Some companies may find that their document looks very similar from one client to the next. However, if their services vary, the document will also need to be changed extensively.
Although a well written document leads to less confusion, dispute resolution is still necessary at times. Arbitration or a lawsuit may occur, depending on the terms of the service agreement. Arbitration is done by a private third party, outside of court. Settling out of court can be preferable for the client for several reasons, including a quicker and less expensive resolution.