Knowledge Series Part 3 of 3
Part 3 – Contracts with Service Providers – Key points to consider
- Scope of Work and Fees: In most cases, disputes arise as expectations were not correctly set in the beginning, and both parties have a different expectation from the arrangement. It is important that both parties are aligned from the beginning on the scope of work. Scope of work along with exclusions should be clearly set out to avoid disputes. The Service Fee and payment structure along with payment due dates should be set out in the agreement. Obligation of tax payments should be captured.
- Redressal of Complaints: The Agreement should clearly set out acceptable parameters of services and goods and the manner in which complaints can be redressed. Clear timelines, points of contact and escalation matrix should be set out to address grievances and deficiency in services. Company’s right to deduct service fees due to deficiency in services should be clearly captured as per the commercial understanding between the parties.
- Representations and Indemnity: If the Service Provider is hired basis his qualification or licenses, specific representations in relation to such qualifications and licenses should be set out. The Service Provider should be required to immediately notify the Company about any development which causes any representation to become untrue. The Service Provider may be required to indemnify the Company against any losses faced by the Company due to a breach of the representations or covenants provided by the Service Provider.
- Transition Services: The Agreement should clearly set out an obligation on the Service Provider to provide transition services by completing handover of information and documents to a successor service provider in the event of termination of the service agreement. This is important to ensure that services are unaffected due to termination of the agreement and complete information and documents are passed on to the successive service provider, to enable a smooth transition.
- Confidentiality: Details such as price list, marketing plans, business plans, internal policies and agreements are important assets of a Company, disclosure of such information can cause great loss to a Company. Accordingly, every Agreement should clearly identify confidential information and also set out restrictions on disclosure of such confidential information or use of such information for personal benefit. Procedure of return of confidential information at the termination of the agreement must be set out.
- Set-Off: The Agreement can provide the Company with a right to set-off any amounts payable to the service provider against any amounts it has to bear due to, negligence of the Service Provider, any claims raised on the Company by third parties, penalties levied on statutory bodies, losses suffered due to a breach of the Agreement by the Service Provider. Events which entitle the Company to set-off fees should be clearly set out.
You can read Part 1 of this Knowledge Series – Contracts with Employees here.
You can read Part 2 of this Knowledge Series – Contracts with Customers here.
For more information about Contracts with Service Providers you may write to us at:
solutions@bridgeheadlaw.com.
– Karan Narvekar | Partner
Views expressed are personal to the author and do not constitute as legal advice.
