Articles

Our Guide to Supply of Services Contracts

By AL Walker, Date published: 2021-08-17

supply of services contract

If you’re reading this, it means you’re taking the first steps towards establishing effective Supply of Services Contracts for your business. These contracts will be an invaluable part of running your company smoothly and you’ll thank yourself for putting in the initial time to put your legals in place. 

Why is a Supply of Services Contract Important?

In a nutshell, they set out the services to be provided so there is no miscommunication about what will be provided, and how. These contracts set out in simple terms the services to be provided, the contract period, the purchase price, the payment terms, and which party will own intellectual property rights in the works created.

They provide an essential reference to discuss and negotiate effective outcomes whenever situations change, in terms of the client’s requirements and the provider’s capability. When things go wrong —let’s face it, there are always going to be hiccups down the road— referring back to the supply of services contract will assign responsibility for the failure. 

Formal signed agreements or contracts are also useful and can be essential, for when service problems or failures occur, or for when the customer’s or client’s requirements change one way or another. A is a short-form contract between a service provider and a customer for the provision of services.

Issues to consider

When planning, negotiating and drafting agreements for the supply of goods or services, counsel must often consider and address a variety of issues, including:
  • How the buyer will pay for the goods or services (for example, by cash, special financing, or a letter of credit).
  • How to define the parties’ business relationship.
  • Corporate social responsibility trends that might affect the supply chain.
  • Apportioning liability and risk.
  • Planning potential dispute settlement arrangements.
  • The buyer’s rights under the Uniform Commercial Code (UCC) to accept, reject, and revoke its acceptance of a seller’s delivery or tender of goods.
  • How to demand adequate assurances that a contract for the sale of goods will be performed.

What is included in a supply of services contract?

Important things to include in this contract are:

Price Details: a contract can be done for a small or larger-time frame. Supply of services contract done for a longer period of time includes both risk and opportunities for the supplier. There might be chances that the price would go down or up so it is very crucial to decide and fix the price details while drafting a supply of services contract. If the contract is for a long period of time then both parties can agree to adjust the price varies according to the various external factors like inflation, third party cost, etc.

Length of the contract period: Normally the length of the contract period varies according to the nature of services offered. It might be a long-term contract as well as short term.

Service charges and payment terms: service charges can be decided by both parties and can be structured in different ways. It can be either on a fixed price basis, time and material cost basis, or a combination of both. Normally a hybrid plan can be useful for both supplier and business to pay the cost according to the market situation.

Responsibilities of the service provider: It also includes the responsibilities of the service provider for delivering the services. This basically includes a clear and accurate description of the services offered.

Termination: termination arrangement and provision should be clearly discussed while creating a supply of services contract. This will help both parties to terminate the contract legally if they are not satisfied with the service offered. Normally a notice period is decided by both parties before terminating the contract.

Ownership of intellectual property rights in the works created: while drafting a supply of services contract it is very important to consider ownership of intellectual property rights created while delivering the services. The perspective of both parties towards ownership of intellectual property rights helps to settle down the disputes if arise in the future and also safeguards the legal rights of both parties towards the ownership.

Conclusion

Businesses need a supply of services contracts to manage their services with third parties. This will help both parties to know better about the terms and conditions of the services being offered and also provides a measure to settle down disputes if arise in the future. 

Use our quick and easy Zegal Supply of Services Contract.

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

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Tags: SAAS | small business | startups | supply of services contracts

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