It is not only a matter of drawing up service provider contracts. Proper review and adaptation of documents is a key element for the adequate management of business relationships. The following is a description of most of the contractual aspects and best practices that should be considered:
0. Contracting parties and participants
We must make it sufficiently clear who the contracting parties are and ensure that the parties to the contract have legal standing to act on behalf of the contracting parties.
- Essential clauses of the contract
A service contract should always include clear and complete clauses defining the obligations, rights and responsibilities of the parties involved. These clauses usually include:
– Purpose of the contract: Specify the services to be rendered, the work to be performed, the range of action, its specific scope and the objectives sought.
– Duration of the contract: Determine the term and conditions for renewal or early termination. Also, the probable causes for cancellation.
– Consideration: Stipulate the prices, rates, or payments, as well as the billing schedule. Detail the issuer and receiver of the invoices. Delimit the periods or tranches included in each issue.
– Performance guarantees: Define mechanisms to ensure compliance with obligations, such as penalties or financial guarantees. Agree on overdue payment interest in the event of delay in invoices liquidation.
– Confidentiality and privacy: Incorporate clauses that protect the information shared by both parties during the contractual relationship. Even extend this protection beyond the term of the contract.
– Communication: Indicate the form and means of conducting all notifications, requirements, or requests to be made by the Parties. Identify the valid interlocutors for all communications.
– Dispute resolution: Specify the procedure for resolving disputes, including the competent judges and courts.
Applicable legal framework
Each contract must comply with the regulatory framework of the country or region where the service is to be provided. Some aspects to consider include:
– Regulatory compliance: Verify that the terms of the contract respect all pertaining rules contained in the Spanish Civil Code, and applicable laws at any time.
– Taxation: Ensure compliance with tax provisions related to invoicing and payment of the corresponding taxes.
- Conditions for the provision of services
Not only the clear definition of the services to be provided, but also the range of action and the scope of the work to be performed, are essential to avoid misunderstandings and ensure proper execution. Precisely, this includes the analysis to be performed, deliverable reports, follow-up reports and the entire procedure to be followed in the provision of services.
- Recommended practices in relation to billing
To optimize the billing process and avoid conflicts, it is suggested:
– Transparency in rates: Guarantees that we can know from the beginning what the final cost of the service agreed in the contract will be.
– Clear payment terms: Having a payment schedule, depending on the agreed milestones, provides security for both parties.
– Formalization of the process: By implementing a system that facilitates the issuance, receipt, and follow-up of invoices, we can save resources in the process.
- Adaptation and revision of the contract
Regardless of whether we have all aspects clearly defined, a degree of flexibility is also advisable.
– The conditions and circumstances of the company may change during the development of the project.
– The situation may require modifications to meet new objectives or to extend the initially planned time commitment.
– The record of changes must be adequately documented via annexes incorporating the agreed additions.
Conclusion
Multiple factors must be considered when drawing up service provider contracts. In addition to containing the most operational aspects of the projects, their formal-legal approach is also relevant. Theefore, the guidelines and recommendations described above help to ensure not only regulatory compliance, but also that both parties are protected and achieve the intended objectives. One party provides the contracted services and receives the agreed consideration for them. The other party receives the services rendered and pays the agreed price as remuneration.
