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Learn more about Service Agreement in Philippines

A Service Contract is an agreement between two or more parties to do certain activities. These might include things like tuning up a car or painting a house. Contracts for Services are distinct and distinct from contracts for products. Service Contracts are most commonly used by consultants, freelancers, and contractors. This sort of contract involves one person or party paying another to perform a certain act. A “Service Agreement” is a legal document that describes the conditions of a service provided by one party to another in exchange for payment. When two parties enter into a legal contract, they are legally protecting both the individual worker and the corporation. A Consulting Agreement can also be used for highly specialized services or for a highly competent service provider.

Table of contents


What is a Service Agreement?

A Service Agreement is a type of Commercial Contract that seeks to codify the connection between a firm, in this case a service provider, and its client. This contract is intended to define both parties’ rights and duties.

Many businesses use service providers in exchange for a fixed fee. Whether it is computer repair, communal catering services for businesses, cleaning services, security services… Because of the multiplicity of scenarios, there is no standard service supply contract. It is therefore critical to obtain a model that can be altered and updated to your specific needs, or, in certain situations, to retain the services of a lawyer who specializes in its preparation.

Why draft a written Service Contract?

There is no requirement for the Service Agreement to be in writing. However, it is strongly advised that it be in writing to avoid future disputes. Furthermore, in the professional sector, estimations are employed if no agreement is made. This entails providing a written document to the client outlining the services that the expert will provide, as well as their price and the date of completion, even before an agreement is reached between the parties.

This estimate allows the customer to have a clear notion of the service that will be performed and, in the event that its share is accepted, to successfully realize its agreement with the fulfillment of the anticipated services. The formulation of an estimate has different effects for both the professional and the customer:

➤ It absolutely engages the professional on the pricing and techniques of service implementation (this is why it can be advisable to limit the validity period of its estimates).
➤ The consumer is only committed when he indicates a desire to entrust the expert with the service's implementation (before that he remains free and can even entrust the service to a competitor).

It should be emphasized that generating an estimate is, in theory, optional. However, in some instances, it is required.

What is included in a Service Agreement?

The contents of a Services Agreement vary depending on the Services supplied, the Supplier-Client relationship, and the contents of linked papers, but frequent provisions include:

➤ Confidentiality : neither side may reveal the other's secret information.
➤ Service delivery : The Supplier commits to deliver its services without interfering with the Client's operations and to follow all applicable laws, rules, industrial awards, and recommendations.
➤ Resolving disagreements : arbitration or mediation may be required methods for settling conflicts between the Client and Supplier.
➤ Inspection and testing : The Supplier shall keep the Client fully informed on all elements of service performance and must allow the Client to inspect, examine, and test any aspect of the services.
➤ Intellectual property : In general, the Client owns any intellectual property developed during the performance of services.
➤ Outsourcing : The Client understands that the Supplier may need to hire subcontractors in order to complete the services by the completion date. Certain guarantees are needed of the Supplier in relation to these subcontractors.
➤ Non-circumvention : the Supplier will not get directly to their client by going around the client.
➤ Payment - what fees will be paid to Supplier, and when and how will these amounts be paid.
➤ Quality of services : The Supplier must supply services that meet the description provided in the proposal within the specified completion date.
➤ Term : The duration of the agreement is often indicated in terms of a specific beginning date and completion date.
➤ Cancellation : Once the Supplier has completed supplying the services, the agreement can be canceled by writing notice. Either party may also cancel the agreement if an essential provision of the agreement is violated.

How to write a Service Agreement?

Identifying the service provider and the consumer is the first stage in creating a Service Contract. Make certain that each party’s contact information is included in the agreement.

The following stage is to include a description of the services that will be offered. This description should be precise and accurate, explaining what the service provider is required to accomplish during the term of the agreement. Misunderstandings are reduced when you offer more depth in your description. Accurate service descriptions also assist the consumer understand what to expect. When the description clearly defines the service provider’s obligations, they know what they need to perform.

A Service Agreement should include a payment plan. This should decide the specifics of the arrangement’s payout. Make sure to include elements such as:

➤ Whether a tax is levied
➤ Pay scale
➤ Late payment penalties
➤ Penalties for failure to perform
➤ Who will supply resources?
➤ When will payments be made?

The agreement should include provisions for non-competition, non-solicitation, and confidentiality. Confidentiality is not required in all service agreements. It is up to the consumer whether the services offered should be kept private. Including confidentiality terms in the contract can assist secure and limit access to sensitive information about the company or the client.

The customer can also specify whether non-competition and non-solicitation clauses should be included. These restrictions assist to prohibit the supplier from soliciting business or unfairly competing throughout the contract period.

What is the difference with a subcontract?

A Service Agreement, like a Subcontracting Agreement, is a Commercial Contract. In concrete terms, the distinction is in the length of the agreement. A subcontracting arrangement is often restricted in time and punctuality, but a service agreement can permanently outsource a company’s operation.

The objective of the agreement differs as well. A subcontracting agreement entrusts the subcontractor with the job of carrying out a work that the firm could undertake itself since it is related to its main business, but that the client assigns because it lacks the necessary resources to do so. The service agreement, on the other hand, is for a work that the client firm cannot undertake internally because it has the necessary capabilities.

As a result, the distinction ultimately affects the service’s eventual receiver. The provider’s services are delivered directly to the client, whereas subcontracting refers to services delivered to the final customer. As a result, the subcontracting relationship is triangular. More specifically, and in light of these issues, subcontracting is also subject to unique and highly severe laws in order to safeguard the subcontractor.

What legal considerations apply to a Service Contract?

Before signing a services agreement, you should understand what the contract entails for you or your company. Keep the following legal factors in mind:

1. Responsibility: A services agreement can restrict either party’s liability, but the limits must be fair in order to hold up in court.

2. Obligations: Clients must agree to collaborate with the service provider by supplying necessary information and providing access to equipment or venues.

3. Fee Changes: Both parties should agree on whether the service provider has the right to adjust the rate and how much notice they will give.

4. Termination: Either party should be entitled to terminate the contract with writing notice, and the agreement should automatically terminate if either party violates the conditions.

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