What to include in your service provider contract (Easy to use checklist)
Key clauses to include in your service provider contract
1. Service scope
It is really important to clearly define the scope of services to be provided under your service provider contract. This could include a detailed description of the services, any specific deliverables or milestones that need to be achieved when performing the services, and any specific timelines for completion of the services.
2. Supplier information
It should be clear under the service provider contract exactly who is providing the services, as well as who is authorised to provide the services on their behalf (e.g. other group companies, sub-contractors).
3. Duration and renewal
The duration that the service provider contract will last for should be set out. It is also important to make it clear what will happen to the contract after that initial period e.g. if it will automatically renew for subsequent periods.
4. Service standards and supplier obligations
The standards that the service provider will be held to when providing the services should be listed in the service provider contract. This could include specific service levels or key performance indicators (KPIs) that the service provider must achieve when providing the services (such as responding to customer support queries within specified timeframes).
5. Customer obligations
The service provider contract should also list the customer’s responsibilities, especially where the service provider is dependent on the customer doing these to be able to provide the service. For example, the customer may be required to provide the service provider with access to its premise, staff or other information.
Sometimes a customer will require warranties to be provided in the service provider contract. A warranty is a contractual promise or statement of fact that is true at the date of the contract. If it can be proved that a warranty is untrue, the party receiving the warranty could claim that there has been a breach of contract. As a result, the party receiving the warranty may be entitled to recover all losses incurred due to the breach of contract. In a service provider contract, the warranties that the service provider is asked to provide could include warranties that the services will be provided to a certain standard or that the services are being provided in accordance with the law.
To manage its risk profile and potential financial exposure, a service provider may want to include a limitation of liability clause in the service provider contract. This type of clause will limit the service provider’s financial exposure in the event that the customer has a valid claim under the contract, by fixing a financial limit (known as a liability cap) that the customer is entitled to claim up to. Losses above that liability cap limit will not be recoverable by the customer.
8. Intellectual property rights
It should be made clear in the service provider contract who will own the intellectual property rights in any deliverables provided under the services. This can be crucial as a service provider, as you will need to ensure that you are not inadvertently giving customers any rights that could impact your ability to provide services to other customers.
A clause should be included in the service provider agreement that sets out each party’s termination rights. Termination rights give a party the ability to bring the contract to an end earlier. There are two main types: (i) termination for convenience, where a party gets a right to terminate the contract at any time and for any reason as long as they provide the required period of notice to do so; and (ii) termination for fault, where a party can terminate the contract immediately where certain circumstances occur (such as the other party being in material breach of the contract terms or suffering an insolvency type event).
10. Consumer specific terms
If the services are being provided to consumer customers, specific terms need to be included in the service provider contract for it to comply with consumer protection laws. For more information, read our FAQs on providing services to consumers.
Tags: service provider contract, service provider agreement.
Related legal templates
Docue is trusted by so many growth companies – from sole traders to listed companies.