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Contracting Function

Why do I need a Services Agreement?

7 minutes • 17 May 19

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What is a Services Agreement?

The Services Agreement is the “work horse” legal agreement of the global business community, facilitating millions of essential commercial service interactions each day, but all too frequently its true “business-enabling” potential is not realised.

Parties looking to provide services like to get paid, and parties receiving services only like to pay for services properly provided. Given such obviously aligned interests, Services Agreements should perform reliably – but all too often they don’t.

Most businesses feel that the Services Agreement contracting process takes too long to conclude, often involves too much legal expense and generally results in sub-optimal delivery, or in the worst-case scenario, litigation from contractual disputes.

In this article we share with you the basic insights that can allow you to better harness the business-enabling potential of the humble Services Agreement.

A “business-enabling” Services Agreement that can be agreed between parties with minimal time, cost and fuss can be accessed here.  Given how critical it is to the conduct of business, every business needs an efficient Services Agreement solution.

Create your custom Services Agreement by clicking HERE

The Role of the Services Agreement

The Services Agreement allows businesses to source essential services or skills which a business is unable, or less well placed, to provide for itself. Almost all businesses rely on another business for the provision of services at some point.

From a holistic viewpoint, the documentational universe of a service provision arrangement typically includes:

  • the Services Agreement: the basic terms and conditions upon which the services will be provided and payment is made.
  • the Purchase Order: an instrument under the Services Agreement allowing the customer to call for service provision under the Services Agreement or one which describes such services, and includes its own legal terms and conditions.
  • the Service Level Agreement: either a standalone agreement or an instrument within the Services Agreement that articulates the specific service levels,     how they are measured and reported and what happens if they are not attained.
  • the Master Services Agreement: an overarching agreement that governs the provision of a range of services on pre-agreed terms that can be available to a company or group of companies, frequently operating globally.

Depending on the level of sophistication of a business – a service provision arrangement might comprise some, or all, of the above. However, it all amounts to the same thing – a business needing services support and the service provider looking to be paid for that support.

Unquestionably, the Services Agreement, as one of the most essential forms of legal co-operation between businesses, is just as important to smaller businesses as it is to multi-national companies. All businesses need a robust Services Agreement solution.

The Benefits of a Services Agreement

The benefits of a “business-enabling” Services Agreement are as profound as they are simple – the parties get out of the agreement what they intended when they went into it.

Both parties benefit from a well-defined Services Agreement. The Services Agreement keeps the relationship within the agreed parameters and if properly constructed, motivates and incentivises an accountable form of delivery that keeps the parties aligned.

“Without question, every business needs a robust Services Agreement in order to drive effective, productive and efficient business engagement."

If businesses can implement more effective service provision arrangements (i.e. outcomes achieved) in a more efficient manner, the net contribution to the overall level of business activity of each party, and the global economy, would grow exponentially.

So given the evident benefits of a “business-enabling” Service Agreement, why then does this all too frequently prove elusive? The answer is that parties all too often are placing negotiation effort in the wrong areas.

Why do Services Agreements fail to perform as they should?

The irrefutable reality is that most Services Agreements do not fail to deliver a lack of clever words included in the contract by lawyers. The root cause of failure is far more basic than this.

Most Services Agreements fail to perform as hoped because the parties fail to reach a clear and mutual understanding on the following essential matters:

  • What is to be provided and by whom?
  • How is it to be provided and by when?
  • How proper service delivery will be recognised?
  • What happens if the services are not properly provided?
  • How much does it cost and when is payment required?

Whilst painting with a broad brush, there are three key factors why both parties' attention are not focussed enough on the above “essentials”:

The Rush: all too often parties think a deal must be signed “now” at the expense of clearly articulating the above essentials. A “business-enabling” deal will only ever emerge when alignment on essential points emerges – so take your time.

The Leverage: Service Agreements are mostly produced by the service provider, who would typically leverage your needs for a prompt solution to their advantage by insisting on asymmetric legal risk terms.

The Lawyers: lawyers tend to direct the focus on what happens if things go wrong and not on what it will take for success to occur. Planning for risk eventuality is not wrong – but it cannot crowd out the opportunity to encourage successful performance.

Getting what you need from a Services Agreement means reviewing the Services Agreement to ensure that it deals with the essentials whilst securing sensible legal risk allocation in a time frame that keeps up the vital deal momentum.

How can you achieve a “Business-Enabling” Services Agreement?

With the Services Agreement being one of the absolute fundamentals of a strong business, including a “business-enabling” Services Agreement template in your arsenal of corporate assets is essential. Fortunately, getting it right is not as difficult as you might think.

Given that a Services Agreement is concluded hundreds of thousands of times per day, there really isn’t any magic in how to conclude a good one. However, for the reasons described above – optimal service-based contracting frequently eludes the parties. 

What if there was a different way? What if all the essential pre-sets for a “business-enabling” contract - good industry practice, acceptable industry risk allocation - were already dialled in so that parties can focus on the basics?

“What if you could adopt or start with a Services Agreement template that allowed the parties to focus their energies on the essentials of service delivery?”

The Global Legal Solutions automated Services Agreement delivers precisely this - and in minutes. By following an online interview, a world class Services Agreement can be produced for you in minutes and allow you to be focussed on the essentials.

If focus is not placed in the right areas, the opportunity to conclude business is itself in jeopardy. The inability to conclude a contract quickly can result in the opportunity going cold.

A Services Agreement from a traditional law firm can cost thousands of dollars, and in many cases, tens of thousands of dollars, and when customisation may be required with each piece of new business, that too can result in significant annual expenditure.
 

A traditional law firm may charge you thousands of dollars and take days or weeks to turn around a Services Agreement.  The Global Legal Solutions platform takes minutes and only costs USD $799 and includes a 30 minute expert consultation.

To build your own Services Agreement, dialled in to all the things that matter, allowing you to tailor the agreement to your country of operation and business needs, click here to begin.

READY TO TRANSFORM YOUR LEGAL TEAM?

Please check out the GLS solutions and know-how resources listed on the right side of this page – they might assist your legal team with the issues explored in this Blog. 

Of course, if you would like discuss your transformation needs – please book a 30 minute FREE CONSULT WITH GLS 

In the interim, here are 7 resources and tools that may assist you as you transform the performance capabilities of your legal team:

1. GLS's Ultimate Guide to Legal Operations: download this HERE, and read it thoroughly and regularly. It is a wonderful transformation companion

2. GLS Transformation Boot Camp: for our free and hugely successful, 10 week long, email-based boot camp on how to effectively transform your legal team you can SIGN UP HERE

3. GLS Knowledge Centre: click HERE to access lots of informative and instructive white papers, blogs and training resources etc. - all focused on helping to improve your legal team's performance

4. GLS Legal Operations Community: join the GLS Legal Operations Community and collaborate with other in-house leaders as they seek to tackle many of the same performance issues that you face, click here to JOIN NOW

5. Visit GLS Connect: visit the GLS CONNECT PAGE and select the information you would like to receive from the GLS Legal Operations Community

6. GLS Legal Team Transformation Plans: mitigate the risks of transformation failure by taking a GLS TRANSFORMATION SUPPORT PLAN 

7. Register: GLS Legal Operations Centre: REGISTER HERE to access the GLS Legal Operations Centre for free and to receive more than US$20,000 worth of legal team performance resources

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