What are the key elements of a Service Agreement?
Here are our ten general service agreement tips, which should provide some of the key issues to cover in your initial discussions with a potential client of your services.
- Statement of Work: What is a Statement of Work? The service agreement should include a statement of work, which identifies the project’s scope and the respective responsibilities of you and your client. Oftentimes, if conflict arises it’s because the scope wasn’t properly defined, which led you and your client to interpret scope differently.
- Proprietary Rights: What are Proprietary Rights? While creating the work, you may create new generic elements that you want the right to use for future client work. Therefore, ensure these generic elements (and third party software) are distinguished, in the service agreement, from the code that will be owned by your client.
- Delivery: How and when is the work being delivered? Ensure the answers are clearly outlined and are attainable.
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- Fees: What will you be paid for your services and when? Clarify what you are being paid and when. It can’t hurt to clarify that HST, if applicable, will be added. Regarding the payment schedule, one option is that a portion is paid when the agreement is signed and the rest is paid on milestones associated with deliverables. Consider your cash flow before agreeing to a schedule that seems too delivery-focused. Also, you can leverage Intellectual Property to get paid by making sure that the full rights to use the deliverables don’t transfer to the client until payment is received in full.
- Change Requests: What are the stipulations surrounding change requests? Plans change over time, and the scope of your arrangement may be amended. To plan ahead for this, there should be a process to ensure that change orders are made clearly and in writing and that changes in fees and schedule are spelled out and agreed.
- Warranty versus Maintenance and Support Services: Are maintenance and support services included in your fee? If so, to what extent will these services be provided before you start charging extra? Also, how will both parties deal with defects to the final deliverable? Do you provide a period of warranty to cover your client for a certain amount of time, or indefinitely, to fix bugs?
- Delays: What situations should extend the deadlines? If your client is late on providing you the collateral you need to finish the job, how should the deadlines be amended?
- Publicity: What are the stipulations surrounding publicity? Do you intend to showcase the client’s logo and a sample of the work you’ve done for the client on your web site? Be sure to get the go ahead in advance.
- Indemnification: What are the indemnification considerations? Among other protections, the service agreement should provide that the client will cover you should the assets they provided (such as their artwork / logos) infringe the rights of others. An extreme example is that your client stole their logo from someone, who in turn goes after you and the client. Why should you be exposed? Make sure that risk stays with the client.
- The Right Client: Is this client the right fit? A well-drafted agreement can only go so far in helping you deal with a difficult client. If, during pre-agreement discussions, the client is being very difficult, demanding unrealistic timeliness, and/or providing insufficient financial incentives, they may not be the right client for you. While it’s easier to say no to a potential client when you have other opportunities in the wings, not having other business might not be a good enough reason to do business with a client that isn’t a good fit.
10 Service Agreement Tips Conclusion
This blog merely scratches the surface regarding the items identified above and the other general and scenario-specific considerations for a service agreement. Whenever you’re ready to enter into a service agreement with a client, feel free to call us with your questions and/or to assist with drafting an appropriate agreement for your circumstances.
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© 2018 Edwards Creative Law, LLP – Updated to March 29, 2023
Edwards Creative Law is Canada’s Entertainment Law Boutiqueâ„¢, providing legal services to Canadians, and international clients who partner with Canadians, in the Film & Television, Music, Video Games and Apps, Publishing and Literary industries.Â
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* This blog is for general informational purposes only and is not to be construed as legal advice. Please contact Edwards Creative Law or another lawyer, if you wish to apply these concepts to your specific circumstances.
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