Startups offering services should ensure that their service agreements are carefully drafted to accurately reflect the role and responsibilities of the service provider. Legal advice is essential to ensure that businesses understand what provisions should be included and the effect of those provisions on both parties to the contract. Written agreements will often prevent disputes arising as to the interpretation of contractual terms, but oral agreements can be equally binding.
Service relationships between client and service provider by their nature require more management over the duration of a contract than product relationships of customer and supplier. Startups offering services should ensure that their agreements are individually tailored to genuinely reflect the services they offer and the way that they do business.
Although the commercial world is largely dominated by written agreements, experience has shown that many entrepreneurs do not appreciate how readily poorly drafted and unsuitable agreements can lead to litigation. The common practice of ‘borrowing’ an agreement from a similar business and changing the name at the top can have a disastrous effect on any business, but particularly a startup where efforts should be focussed on growth and development. Unnecessary and avoidable disputes can bring both to an abrupt end.
It is rare to see any business work on the basis of oral contracts, despite the fact that they are, theoretically, equally enforceable. Startups will sometimes enter into informal, orally agreed arrangements to get the ball rolling on a new project, but it is always preferable that written contracts are agreed because of the uncertainty of what has actually been agreed between the contracting parties.
Entrepreneurs will often have a very good understanding of the service they wish to provide but it can be difficult to incorporate agreements in line with their vision. For a young, growing business it can be difficult to allocate the time, and money, required to draft suitable agreements for each new project. The importance of seeking legal advice at this early stage is the protection provided by an effective services agreement and the speed and ease with which new contracts can be entered into.
Standard service agreements are a good way to provide all parties with legally sound, enforceable documentation which sets out each party’s rights and responsibilities. Suitable exclusion of liability and termination provisions can save a business thousands when things go wrong.
In circumstances where a client seeks to negotiate the terms of a contract, solicitors will explain the implications of varying standard terms and advise whether an alternative or additional clause can offer equal or further protection.
Service providers should be particularly aware of the difference between supplying a commercial organisation and supplying private consumers. Private consumers, in contrast to commercial organisations, are governed by different laws which often afford them greater legal protection.
Service contracts should include, amongst other provisions, the following key terms:-
Boiler-plate provisions should also be considered and tailored to the specific circumstances of the supplier.
For specialist advice regarding drafting, negotiating or enforcing service agreements, contact our commercial solicitors on +44 20 7353 1770.
For business legal advice and more information on commercial contracts and our London business lawyers, contact us online or call us on 020 7353 1770.
