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Why You Should Have a Service Agreement as an IT Business

Why You Should Have a Service Agreement as an IT Business

Are you thinking about starting an IT business? Not sure whether you need a service agreement? Learn about the importance of a SA in the IT industry!

8th October 2019
Reading Time: 3 minutes

Secure Your Startup With A Service Agreement

Starting or running an IT business is can be challenging. There are always a million things to do at any given point. However, the multitude of different tasks needed to be completed at any given time can often lead to companies neglecting their legal obligations. A service agreement is a vital legal document that all businesses should be wary of. A  service agreement sets out the terms and conditions between you as the service provider and the recipient of your services. As an IT business, online customers legally need to be aware of the terms and conditions associated with your business. Therefore, this article will explore some of the key terms that should be included in your IT service agreements.

Clarify Your Service To Customers

Furthermore, a provision of service term forms the most critical aspect of any service agreement. The provision of service defines the tasks a business will perform for its customers. For example, if your company builds websites, it might identify the scope of the website that you will produce for a client. IT businesses require this term to explain to customers the exact details of the service. In the case of a dispute, parties will often refer back to this term to define whether the work completed fell within the scope of the agreement. Therefore, IT businesses require a service agreement to define the provision of their services.

Define Payment Terms

Second, to the provision of the services agreement term, IT businesses should ensure they include payment and deposit terms. Most service agreements will consist of some form of a deposit to secure the service. The agreement should also include a payment schedule that defines when a payment should occur. For example, if you are a streaming service, you may want to include a term that describes when customers can be charged. However, the term can also include measures for late-payments and lost deposits. Payment terms must be clear and precise to ensure that parties are aware of their responsibilities. Therefore, IT businesses should always consider the wording of their payment terms in their service agreement.

Identify your Warranties, Alterations, and Rejection Terms

Furthermore, warranty, alterations, and rejection of service terms are essential to any IT service agreement. A warranty is a written promise to replace a faulty product. If your IT company chooses to offer a warranty, it should be included in the service agreement. However, warranties differ from consumer guarantees. Consumer guarantees cannot be excluded which protects consumers. An IT business could offer a warranty if their product does not work. For more information about the effects of warranties, visit the ACC website. Alterations and rejections terms also provide a guide to the parties if a term in the agreement needs to be changed. 

A Service Agreement Protects Your Intellectual Property

One of the most critical reasons why your IT business may require a service agreement is to protect your intellectual property. Intellectual-property is an intangible property that protects creativity through patents, copyrights and trademarks. Typically, parties keep all intellectual property that they own. Intellectual property becomes incredibly essential in licensing agreements. This term prevents customers from misusing and claiming ownership over your property. Therefore, intellectual property terms are crucial to securing your intellectual property.

Termination and Dispute Resolution clauses

An IT business service agreement can clarify termination and dispute resolution terms. A dispute resolution term defines how disputes in the agreement should be resolved. Typically, parties will choose the forum for the dispute resolution to occur close to their proximity. For example, an IT company in NSW may choose the dispute to be subject to the NSW jurisdiction. The types of dispute resolution processes can include mediation, arbitration, and conciliation. Furthermore, if the parties can not resolve the dispute, a termination term may need to be employed. A termination term describes how to terminate the relationship and who is responsible for such an incident. If there is an illegal act from one of the parties, the other is entitled to end a relationship. Therefore, these terms are essential for dictating how relationships should be resolved.

Build Your IT Business With Confidence

Thus, service agreements are essential for any IT business. This article has highlighted how important these agreements are for protecting parties interests. However, there are a variety of terms that this article has not explored. Consider seeking independent legal advice to ensure you have included all the necessary terms in your business service agreement. Therefore, always ensure that all aspects of your service are covered by your service agreement.

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Joshua Cutrone

Josh is a Legal intern at Lawpath. He is a Commerce/Law student at Macquarie University. He has an interest in cyberlaw and blockchain technology.