Client Service Contracts

The Importance of Client Service Agreements

Client Service Agreements define the scope of services, compensation, exposure to liability and other elements of the relationship between a business and its customers or clients.

The performance of many contracts happens simultaneously. For instance, the purchase of food a grocery store is a simple exchange of food for money. For simultaneous performance, extensive contractual provisions are unnecessary because both parties can verify for themselves the performance of the other at the time of the performance. It is unnecessary for either party to rely on any promises of the other, so no promises need to be made.

In the service context, payment and performance of the services often occur at different times. A Client Service Agreement allows each party to make promises and rely upon the promises to of the other that the services will actually be provided and that payment will actually be made. A contract is a legally enforceable promise to do or not do something. If a party fails to perform as promised, the other party to the contract may sue to either enforce the specific performance of certain promises or to collect monetary damages.

Although some contracts are required to be in writing in order to be enforceable, most contracts can be oral. The advantage of a written contract is both practical and legal. Practically speaking, a contract often shapes the parties’ expectations and can prevent misunderstandings from occurring and souring a relationship. Furthermore, a written contract is often the best proof of what the parties have agreed to do, as opposed to trying to reconstruct an oral contract after the fact. If one of the parties has shirked its responsibilities under an oral contract, it may also be difficult to prove that there was any contract at all. Finally, written contracts provide for not just the basic terms of a deal, such as the duration, price, and basic description of services, but can also include provisions for contingencies such as disruptions to the intentions and expectations of the party due to chance, occurrence, or unavoidable accident. A Client Service Agreement can help to allocate those risks, in addition to setting up the primary terms of the relationship between a business and its clients or customers.

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