Service agreements are excellent method of maintaining effective formalise relation between parties to the agreement. They may be used in case of any non-employee working arrangement. An agreement between a Service provider and an individual contractor comes into existence when they come together for aa business preposition. An agreement is signed between the service provider and an individual contractor to acknowledge the future relationship shared by their business. This agreement is treated as an official document which specifies the particulars of the conditions based on which the two came into a professional relationship and needed a contract to control it, and such contract governs the roles and responsibilities of both the parties to the contract.


The agreement signed with the service provider is known as the service agreement. Generally, these agreements have a mandatory guideline to follow a common language and provisions recognized by the law governing the agreement. The key provisions which are to be followed when entering into a service agreement are Payment, Scope of services, Amendment, Termination, Liability insurance, Confidentiality, IP ownership. a service provider needs to ensure that they have well drafted service agreements. This agreement clearly mentions:

  1. The scope of the services which will be provided;
  2. Date and Mode of payment;
  3. The liability and responsibility when something goes wrong;
  4. The dispute resolution process if thing goes wrong.


A service agreement is an agreement which is legally binding document for the parties signing it and accepting to the terms and conditions of the opposite party so mentioned in the agreement. A service agreement sets out the terms and conditions of the professional relationship so formed between the parties to the agreement and mentions each party’s rights, responsibilities and liabilities in case of any infringement to agreement.

General clauses to be followed for drafting a service agreement are: 

  1. Party names clause;
  2. Scope of the services clause;
  3. Important dates and times clause;
  4. Price clause;
  5. Payment terms clause; 
  6. Any other clause that are particular to the arrangement.



Service agreement is treated as an official record, recording all the essential details of the Professional relation so created through such agreement, and can be used in the court as an evidence of relationship and terms and conditions of the relationship shared by both the parties to the agreement. The details which the service agreement must mention are:

  1. Duration of the Enforceability: Specifying the duration of the contract being enforceable. The scope of services concerned in the agreement should be mentioned in a section of the agreement which defines what services company will provide or receive.
  2. Duties, terms, and Liabilities of parties to contract: Details of the duties, responsibilities, and liabilities that both parties are bound to follow with respect to the agreement.
  3. Expenses incurred by the parties: contract specifies that the service provider is liable to reimburse all the reasonable expenses incurred by other party to the contract which were initially to be incurred by the service provider. For securing services, the company needs a deposit which involves balloon payments or series of payments during the duration of the service. 
  4. Confidentiality information: Both the parties to the agreement agrees to keep all the confidential information of each other protected.
  5. Intellectual property rights of the company: Both the parties should have the rightful ownership and rights of the product and service which are being used in the contract. This clause specifies who is the rightful owner of the intellectual property (IP) created as a result of the services so provided with respect to the agreement.
  6. Warranty details: Warranty of Product and service must be specified and agreed upon by both the parties to the contract.
  7. Information about expansion, merger and termination: Information about the expansion and merger of the company in near future, and any detail about the termination of the contract must be mentioned.  If any party commits some unlawful act which eventually results in violation of the agreement. If the agreed services are not completely executed by the service provider, this may be considered as a violation of the terms and conditions of the agreement. 
  8. Right to injunction and Amendments: According to this the agreement provides that both the parties to the agreement acknowledges and gives a commercial value for the services provided and it cannot be compensated by damages in any action of law. The agreement should specifically mention how initial minor conflicts between the parties will be resolved. Arbitration, mediation, or the use of common law courts are the most common forms of dispute resolution. The amendment section of the agreement mentions the details of how the parties can change the agreement if the circumstances change over the course of the relationship.
  9. Information about conflict of interests: Both the parties to the agreement must enter the agreement with a free will and it should not conflict with any other agreement between them.

This agreement also specifies basic details like the address, phone number, complete name of the parties to contract and the date of signing the agreement.


  1. Working Clause:

According to a services agreement, the service provider can work as a contractor or an employee. The legal obligations of a service recipient may differs depending on the fact they engage an employee or a contractor. Employees have a legal right to:

  • minimum employment standards;
  • be paid superannuation contributions by their employer; and
  • have their PAYG tax contributions withheld and paid on their behalf.

A contractor is considered as being independent and in business for themselves because of which they don’t have any such employee rights. 

  1. Contractual Indemnities Clause:

A contractual indemnity is a security or protection against any loss or burden so caused to any party due to mistake or contractual infringement by other party. The clause talks about a situation when losses or damage so caused occurs with reference to the provision of services. This clause mentions the legal fees sustained by another party. The main aim, objective and effect of this clause are to alter the standard legal rights of the parties to the agreement. When drafting indemnity provisions important factors which are to be kept in the mind are:

  • Mention the clause to the specific circumstances of the engagement;
  • Ensure that parties meet the obligations imposed upon them under any clause; 
  • Mention insurance for precautionary measure.
  1. Liability Clause:

Liability clause limits or excludes the party’s liability with respect to the contract. Liability clauses limits or exclude the liability of one, some or all of the parties to the agreement. Where such clauses purport to limit rather than exclude liability, they do so by reference to a maximum amount that can be claimed for compensation. 

  1. Insurance Clause:

Parties to the contract should be aware of any insurance they may need to obtain with reference to the contract. Further, they need to find out whether the contract requires them to list any parties as third parties on the policies.