A service contract is an agreement where the seller agrees to provide a particular service to the buyer for a certain price. For businesses and companies, a service agreement can include services such as advertising, consulting, or management each providing the company a specific service.

There are several important features of service contracts. Service contracts generally include the service provided, the price at which the service will be accepted, the time frame in which the service will occur and/or be completed, and any other critical specifications of the service.

The length of the service in particular is something that must be considered carefully due to an important contract law doctrine called the Statute of Frauds. According to this doctrine, if the service provided cannot be performed within one year of the contract being made and costs over $500 then the agreement must be in writing. If the agreement is not in writing, but just an oral agreement, then the Statute of Frauds makes it so that the contract will not be enforceable.

Additionally, service contracts also include a service-level agreement within the terms of the contract. This part of the contract defines and outlines the service provided, as well as other particular aspects of the service like scope, quality, party responsibilities, down time, etc. Service-level agreements are very specific to the company and require close attention to detail. Moreover, highly customized business-to-business or professional service agreements can result in major gains or losses throughout the process of doing business. Thus, it is highly recommended that you have drafting attorneys create these agreements for you, as they have the ability to foresee the highs and lows and can strategically build in clauses to foster potential profits.

Lastly, service contracts can also include an indemnification clause. Indemnification obligates one party to compensate the other party for any losses, damages, or liabilities suffered due to the contract. In the business realm, this would mean that the company as the customer would hold the service provider liable for damages resulting from the service provided. Indemnification clauses that are written poorly can be very costly should liabilities arise. As such, it is again important to work closely with a drafting attorney to ensure your company is protected as much as it can be. Furthermore, indemnification clauses can require that the other party provide funding sufficient to pay attorney fees, should the need for an attorney arise.

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