Skip to content

Top 5 Clauses to Consider When Reviewing a Services Agreement as a Customer

Table of Contents

In Short

  • Ensure the services, deliverables, and standards are clear and specific, avoiding vague terms that might lead to disputes.
  • Review all fees, additional costs, and price adjustment clauses to avoid unexpected charges. Confirm you understand the payment structure and timelines.
  • Look for measurable service standards, remedies for failures, and fair termination rights to protect your interests if things go wrong.

Tips for Businesses

Before signing, thoroughly review the services agreement to ensure the terms align with your expectations and needs. Pay special attention to liability caps, termination clauses, and SLAs. Consider seeking legal advice to help negotiate favourable terms and ensure the agreement protects your business from unnecessary risks.

You have found a service provider, and they have sent you their service agreement to sign. While you might feel tempted to skip straight to signing, taking time to review key clauses can save you significant headaches in the future. Many customers sign service agreements without adequately understanding their rights and obligations, leading to costly disputes further down the line. 

This article will guide you through the five most crucial clauses you must carefully review before signing a service agreement.

1. Scope of Services Clauses

The scope of services clause forms the foundation of your agreement. This clause should clearly outline exactly what services you will receive and, if applicable, what you will not. Look for specific deliverables, timelines, and performance standards. For example, if you are hiring an IT service provider, the agreement should detail:

  • the service provider’s responsibilities;
  • which systems they will maintain;
  • response times for different types of issues, as you do not want to be waiting days/ weeks for a response to an issue disrupting the services you are paying for;
  • service availability hours; and
  • excluded services.

Watch out for vague or ambiguous language that could lead to misunderstandings. If the scope seems unclear, ask for specific examples and measurements. Remember, you cannot hold a service provider accountable for services they have not explicitly agreed to provide in the contract.

Additionally, you should look for any service warranties or guarantees, such as a promise that the service provider will comply with all laws and follow best industry practices. If the service provider fails to do these things, these clauses may give you the right to terminate the contract and/or bring a claim against the service provider. 

2. Payment Terms and Additional Costs Clauses

Payment clauses often hide unexpected costs that may be outside your budget. Examine the payment structure carefully, paying attention to:

  • base service fees;
  • frequency of payments, including when the service provider will invoice and the due date for payment following invoices;
  • payment methods;
  • late payment consequences; and
  • price increase mechanisms (this is especially important as you do not want the service provider to increase the price with no warning or right for you to subsequently cancel the contract). 

Look for additional cost triggers, which may incur extra costs you must pay under the contract. Service providers often include charges for items like after-hours support, travel time, or emergency assistance. Some agreements allow providers to pass through third-party costs or increase prices with minimal or no notice. 

Challenge any costs that seem unreasonable or unclear, as you want to avoid any unexpected costs in the future.

Continue reading this article below the form
Need legal advice?
Call 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.

3. Service Level Agreements (SLAs)

The SLA defines the quality standards you can expect. A well-drafted SLA should include:

  • specific performance metrics;
  • measurement methods;
  • reporting requirements; and
  • consequences for failing to meet standards.

For instance, if you are contracting for software services, the SLA might guarantee 99.9% uptime and specify compensation for downtime. Without clear SLAs, you will struggle to hold your service provider accountable for poor performance.

Front page of publication
Supplier Contracts Checklist

Use this checklist to ensure your supplier contracts contain all necessary terms.

Download Now

Ensure the agreement includes meaningful remedies for service failures, such as compensation, service credits for future services, or partial refunds.

4. Termination Rights Clauses

Do not get locked into a problematic relationship with a service provider from which you are getting no benefits. Your termination rights should allow you to end the agreement if things go wrong. Key aspects to review include:

  • initial term length (including how long you are initially ‘locked in’ for);
  • notice periods for termination (including how much notice you have to give to terminate, which may be particularly important if the contract auto-renews);
  • termination for convenience options (if any);
  • termination fees; and
  • grounds for immediate termination, such as where the service provider or you are in breach of the contract. 

Watch for lengthy notice periods or excessive termination fees or penalties. You should have the right to terminate if the provider commits a breach of the agreement and has not remedied this breach. Also, check what happens to your data (including personal data), confidential information, and any ongoing services during the transition period (if any) after termination.

5. Liability and Indemnities

Service providers often try to minimise their liability through carefully worded exclusion clauses. Pay close attention to:

  • liability caps;
  • excluded types of losses; and
  • indemnification obligations.

Many service providers will seek to cap their liability at the amount of your fees over a certain period. Consider whether this provides adequate protection for your business risks. In some cases, excluding you from the liability cap will be appropriate, particularly for risks that pose a higher financial liability for you, such as data protection or confidentiality breaches. 

In addition, consider whether you should seek an indemnity for the service provider for key risks, such as intellectual property breaches. Service providers may also try to sneak indemnities in their favour into the contract, in some cases adding unreasonable risk for you.

Key Takeaways

Reviewing a services agreement requires careful attention to protect your business interests. When examining these agreements, you should:

  • ensure the scope of services matches your requirements;
  • understand all costs and payment obligations;
  • confirm service levels are measurable and enforceable;
  • secure flexible termination rights; and
  • negotiate appropriate liability protections.

Other clauses, such as intellectual property, confidentiality, and data protection, may be critical, depending on the service provider’s services. You should ensure that a legal professional thoroughly reviews the contract to advise on all practical risks for the specific scenario. 

Even though the urge may be to skip to the end and agree without reading the agreement, you may find yourself in a difficult situation further down the line. While focusing on protecting your interests, remember that you also have obligations under the agreement, so make sure you can realistically fulfil those obligations before signing, such as paying fees on time. 

If you require assistance reviewing a Services Agreement, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you can access unlimited access to lawyers to answer your questions and draft and review your documents.  Call us today on 0808 196 8584 or visit our membership page

Frequently Asked Questions

What happens if my service provider fails to meet the agreed service levels?

Your remedies depend on your SLA terms but typically include service credits, fee reductions, or termination rights for serious failures. Ensure these remedies are specified in your agreement so you are not stuck with poor service from your service provider. 

Can I terminate a services agreement early if I am unhappy with the service?

Your termination rights depend on the specific terms of your agreement, such as whether you can point to a service provider’s breach of contract. Look for termination for convenience clauses or breach-based termination rights, but be prepared for potential early termination fees in some cases.


Register for our free webinars

Buying a Tech or Online Business: What You Should Know

Online
Learn how to get the best deal when buying a tech or online business. Register for our free webinar.
Register Now

How the New Digital and Consumer Laws Impact Your Business

Online
Understand how the new digital and consumer laws affect your business. Register for our free webinar.
Register Now

Navigating Retail Disputes: Strategies for Resolution

Online
Handle retail disputes effectively and protect your business’ reputation. Register for our free webinar.
Register Now

Brand Attack: What to Do When Your Brand is Copied

Online
Defend your business’ brand from copycats. Register for our free webinar today.
Register Now
See more webinars >
Humna Ahmad

Humna Ahmad

Trainee Solicitor | View profile

Humna is a Trainee Solicitor at LegalVision within the Corporate and Commercial team.

Qualifications: Humna graduated from the City, University of London with a Bachelor of Laws (Hons) and then completed the Legal Practice Course and Masters in 2023. Prior to joining LegalVision, Humna worked at a high-street firm, gaining experience in a variety of areas such as Property, Corporate and Commercial.

Read all articles by Humna

About LegalVision

LegalVision is an innovative commercial law firm that provides businesses with affordable, unlimited and ongoing legal assistance through our membership. We operate in Australia, the United Kingdom and New Zealand.

Learn more

We’re an award-winning law firm

  • Award

    2024 Law Company of the Year Finalist - The Lawyer Awards

  • Award

    2024 Law Firm of the Year Finalist - Modern Law Private Client Awards

  • Award

    2023 Economic Innovator of the Year Finalist - The Spectator

  • Award

    2023 Law Company of the Year Finalist - The Lawyer Awards

  • Award

    2023 Future of Legal Services Innovation - Legal Innovation Awards