A comprehensive review of a service agreement is crucial to establish clear expectations and ensure the smooth delivery of services. Our detailed checklist covers key elements to consider when reviewing a service agreement. From parties involved and scope of services to payment terms, intellectual property rights, and dispute resolution, this checklist provides a comprehensive framework for evaluating a service agreement's provisions. However, it is advisable to seek legal guidance to customise the agreement to meet specific industry requirements and to confirm if there are any regulatory consents, approvals and licences required before the service provider can provide the relevant services.
Parties: Confirm that the agreement identifies the parties involved correctly, including their legal names and addresses.
Method of contracting: understand the form that the contract takes, such as a bespoke one-off contract for services; standard terms and conditions; a master services agreement where the customer can request for the services via statements of work or work orders.
Scope of Services: Review the description of the services to be provided by the service provider. Ensure that it is clear, comprehensive, and accurately reflects the agreed-upon scope of work.
Regulatory approvals: Consider if the services provided by the supplier require any regulatory consents, approvals, or licenses. If such consents, approvals, or licenses are necessary, it is important to determine who is responsible for applying for them, the timing of the application, and the expected duration for obtaining them. It may be prudent to include these consents and approvals as conditions precedent in the contract, ensuring that they are obtained before the contract becomes effective.
Term and Termination: Determine the duration of the service agreement, including the start and end dates, and any provisions regarding renewal or termination. Verify the notice periods required for termination and any applicable termination rights or penalties in the event of early termination.
Service Fees and Payment Terms: Check that the agreement specifies the service fees, payment terms, and billing frequency. Confirm any additional costs, such as expenses or taxes, that may be applicable.
Level of Services: understand the performance standards, response times, and any penalties or remedies in case of service level breaches. Ensure that the level of services in the service agreement aligns with the expectations and requirements of both parties.
Deliverables and milestones:
Consider the presence of deliverables or milestones in the agreement and determine the process for verifying their completion.
Establish clear guidelines for the signing-off process to confirm the satisfaction of a deliverable or milestone.
Evaluate if payment is contingent upon the customer's acceptance of a deliverable and implement safeguards to prevent a potentially circular process. It is important to address the risk of constant deliverable rejection by the customer as a means to delay payment.
Variations: Review which party has a right to request or make changes. And if the customer requests a change in services, if the supplier can charge for the time taken in making an assessment of the request.
Supplier's obligations. Consider if there are any specific obligations which the supplier must comply with, such as:
Ensure compliance with relevant legislation, regulations, or industry codes when providing the services.
Establish procedures for maintaining accurate time sheets to track work hours.
Take necessary measures to secure the availability of key personnel or ensure the continuity of personnel throughout the duration of the services.
Set up the required infrastructure to effectively deliver the services in a seamless manner.
Warranty: Consider what warranties wil the supplier be required to give and what remedies will be available in the event of a breach of warranty.
Intellectual Property Rights: Assess the ownership and licensing of intellectual property rights related to the services. Determine whether the service provider retains ownership, grants a license, or transfers ownership to the client. Clarify any usage restrictions or requirements for intellectual property.
Confidentiality and Non-Disclosure: Verify that the agreement includes provisions for protecting confidential information shared between the parties. Ensure that the obligations and restrictions regarding the use and disclosure of confidential information are clearly defined.
Limitation of Liability: Review any limitations of liability clauses to understand the extent of liability that the service provider may bear for damages or losses. Assess the reasonableness of the limitations and evaluate whether they adequately protect the client's interests.
Indemnification: Check for provisions related to indemnification, which outline the responsibilities of each party in case of claims or liabilities arising from the services. Assess the allocation of risk and ensure it is fair and reasonable.
Dispute Resolution: Assess the methods for resolving disputes outlined in the agreement, such as negotiation, mediation, or arbitration. Verify the applicable jurisdiction and governing law for dispute resolution.
Insurance: Determine if the agreement requires the service provider to maintain appropriate insurance coverage, such as professional liability or general liability insurance, to protect against potential risks.
Subcontracting: Determine if any of the services will be subcontracted to third parties. Assess whether the customer should be notified of proposed subcontractors and have the right to approve them. Evaluate if any terms from the main contract should be extended to the subcontractor, and whether negotiations for the subcontract should occur concurrently with the main contract negotiations. Determine if the subcontractor is required to enter into a deed that benefits the customer.
Please note that this checklist provides general guidance and may not cover all specific considerations for your particular situation. It is always recommended to seek legal advice to ensure the service agreement is tailored to your specific needs and complies with relevant laws and regulations.
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