What is a service agreement?
A service agreement is an essential document if you're thinking about hiring services from a contractor. It’s a written agreement that helps you to state the expectations of both parties and ensures that both the client and worker are covered with a legal document.
If you're unsure of what a general service agreement exactly is, this guide is for you. Here at Bonsai, we work with a range of freelancers and businesses to develop professional templates that can be used in employment settings.
A service contract is a legal agreement that is made at the starting point of a project. This sort of document is brought about to help businesses save money and avoid any sort of issues down the line. When you present an independent contractor with a service contract, they will understand what is expected of them as per the document's terms.
Like regular contracts, service contracts are a mutual agreement that outlines the work that will be undertaken, as well as other important information. This includes the names of the parties involved (including any third parties), the type of service provided, details about the payment schedule, expenses incurred, legal fees, ownership rights, and so on.
Note: Ready for your own service agreement? Sign up to Bonsai now and have it in minutes.
Why do you need a service agreement contract?
As an independent contractor, or when working with an independent contractor or service provider, you should be able to present a clear services agreement. This agreement can be used for all types of trading and commercial jobs, from construction to catering services.
What should be included in a service agreement
There are a few things you must state when it comes to putting together a service agreement for work. We've compiled all that you need to include below for you to refer to if you're unsure what information needs to go in such agreements. There is no set number of pages to keep in mind when you create a service agreement, however, there are crucial details that you should not overlook.
Identification of parties
You need to question yourself on who is involved and who needs to be detailed in the agreement. From the service provider themselves or the independent contractor to yourself as the client. All party names and contact information should be written clearly in the service agreement.
Description of services
Whether you are paying for one or multiple professional services, the agreement should clearly state what work is being carried out and who is responsible for what work.
Being clear about the roles, responsibilities, and expectations involved will go far should the service provider fail to upkeep the services set out in the agreement. If that happens, you will be able to take further action and protect your business.
Deliverables and deadlines
Clarify in detail all the other tasks involved with the project, and determine the deadlines that the service provider will have to meet for each one. A clear timeline means the service provider will be able to organize themselves efficiently, which means your project is going to become more seamless.
Payment terms are often the most important part of any type of work agreement and the same applies to a service agreement. The service provider will want to know how much is their payment amount and when, of course, they can expect payment.
You should also detail more specifically whether there is a provision for expenses incurred or if the services provider is eligible for payment towards overtime.
Should a dispute arise between either party, it is always sensible to have a clear protocol set out in the employment document. When the contract has been signed on either side, a dispute resolution will be in place and agreed upon.
Non-disclosure and confidentiality
Any confidential information that needs to be protected should be included in the service agreement. However, we recommend creating a separate NDA (non-disclosure agreement) to ensure that the service providing party has obligations to keep the information safe.
Ownership of materials
Declaring ownership rights and any intellectual property is an important section to have in your service agreement. It’s here where both parties agree to ownership terms, including what they own and when ownership comes into full force. You should also include any permissions granted throughout the contract.
This will answer the question around what happens should the service provider or client have to cancel on the other party. This agreement should be around who has to find a suitable replacement and if there are any non-refundable flat fee payments to be made.
Termination of contract
Every contract should include a termination clause, which will usually occur on a specific date. However, it can also happen once a certain project is completed, final payment is made, with written notice, or if any clauses in the agreement aren’t upheld — this means the terminating party has full rights to do so without repercussions.
Finally and most importantly, you will need to ensure that all of the parties involved agree to all of the terms in the agreement by signing. As standard with most contracts and related documents, this adds further value and mutual understanding from both parties within the agreement.
Service agreement template sample
Below you’ll find a sample of our service agreement template, which will give you a good idea of how a professional contract template will look like.
What is the benefit of using Bonsai, instead of editing a template yourself?
When you create your own service agreement, you run the risk of making mistakes, missing out on important clauses, and spending a lot of money on legal services to verify it. With Bonsai, we’ve worked together with legal experts and industry professionals to make our contracts fully vetted and make sure nothing important is missing.
The best thing about a contract template from Bonsai is that you can easily edit any of the clauses to fit your professional requirements.
How to create a service contract with Bonsai
Step One - Choose Your Template
Select our service agreement template or start with a blank template. Add your client name, project name, preferred currency, and then click “CREATE CONTRACT”.
Step Two - Add Your Basic Info
Next, fill in your basic information. This includes your location (country and state/province), your legal entity (if you operate via an LLC), your name, and your client’s legal name (company or person). Then click “CONTINUE”.
Step Three - Add Your Scope of Work
Describe the scope of work in as much detail as possible. You can also attach a separate statement of work file here if you wish. Click “CONTINUE”.
Step Four - Add Your Payment Info
Determine how and how much your client will pay you for your services here. You can choose from a flat fee, milestone payments, or hourly, daily, weekly, or monthly rates.
You can also outline payment terms (net 15 days for invoices, for example), late payment fees, and contract start and end dates here. Click “CONTINUE” and then “CREATE CONTRACT”.
Step Five - Review & Sign Your Final Contract
You’re ready to review your fully fleshed-out and vetted freelance service agreement contract. If you want to make any edits to the template, you can do so at this stage.
If you’re happy with the finished contract, you can click “SIGN CONTRACT” to e-sign it and make it legally binding before sending it to your client to do likewise.
Now you can return to your personalized Freelance Dashboard to track when the contract has been delivered, opened, and signed.
Service agreement contract FAQs
Are service agreements legally binding?
If you’re using a service agreement contract from Bonsai and both you and the other party agree to and sign the contract, then it is a legally binding document. If you aren’t using a fully-vetted contract from Bonsai, make sure you seek legal advice from an attorney or law firm to pre-approve the validity of the document.
What is the purpose of the service agreement?
A service agreement is going to protect all the rights and interests of all parties involved. Once you’ve found a prospective job or a potential hire, it’s going to help you to determine who’s responsible for what and outline expectations. This is why it’s an extremely important document to have — should anything go wrong or if the unforeseen happens, a contract is going to help you get what is rightfully yours.