What does a service contract cost?

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What does a service contract cost? This is a question asked when a business owner needs to create a new contract to have their customers sign that outlines the services that will be provided. Let’s explore this question and also review some general information about service contracts.

How Much Does a Service Contract Cost?

A service contract is a legally binding agreement between a business and its clients. Service contracts outline the services being provided to the client, along with terms related to payment, fees, timelines, and many other terms. They differ from sales contracts where a business is typically providing a physical product.

Getting help from a service contract lawyer to draft a service contract is highly encouraged since these are these contracts are the backbone of a business’ relationship with its clients. Service contracts are also important to clearly outline terms between a business and its clients to avoid future disputes.

Based on ContractsCounsel’s marketplace data, the average cost of a project involving a service contract is $497.55 .

Service contract costs depends on many variables, which includes the type of service requested, any protections the business will need, and the number of custom terms needed to be included in the document.

What’s Typically Included in a Service Contract

Below are the key sections that are typically included in a service contract.

  • Name of Parties. This section includes the names of the parties that will be signing the agreement.
  • Outline of Services Being Provided. This section outlines the services that will be in scope for the project or engagement.
  • Timelines. This section outlines any relevant turnaround times or delivery dates for the services rendered.
  • Payment Terms. This section outlines how payment will be handled, by from a timing and payment method perspective.
  • Insurance Requirements. This section outlines if the service provider is required to hold any sort of insurance policy.
  • Indemnification. This section outlines the transfer of liability from one party to another.
  • Warranties. This section reflects any promises being made by the service provider to the client.
  • Dispute Resolution. This section outlines how any future disputes will be handled, should there be a breach of contract .

Additional Terms to Consider for a Service Contract

Service contracts typically include the same general terms governing the transaction. However, depending on the type of service being performed or the nature of the engagement, you may want to include some additional terms for protection. Below is a list of the additional terms to consider:

  • Nonsolicitation clause. This clause prevents a service provider or client from hiring employees or contractors involved in the project.
  • Noncompete clause. This clause prevents a service provider from using inside information to compete in the industry.
  • Confidentiality clause. This clause provides a service provider from sharing proprietary or confidential information they may learn during the project that could be harmful to the business.

Examples of Service Contract Projects

Service Contract Drafting Service

Many business owners will hire a knowledgeable business lawyer to consult and draft their service contract. They may even ask the lawyer to create a master services agreement that includes all of the services being provided for larger relationships. This is where the business will incur service contract costs.

Service contract drafting projects will include a consultation by the lawyer to learn about the business and services it provides to customers. The lawyer will also want to learn about any key terms the business will require in their service contract. Service contract costs can vary based on how many custom terms need to be included in the document.

Reasons you may need to find a lawyer to draft a service contract include:

  • Forming a New Business. You may have just started your business and are looking to create your first service contract to put in place with your clients.
  • Creating a New Service Line. You may have just expanded your service offering and need to create a new service contract to govern client engagements for this new service.

Service Contract Review Service

In some circumstances, businesses may need to hire vendors to help with their operations. In this case, a business may be asked to sign a service contract and be provided with another party’s contract. You may want to have a lawyer review the service contract before signing it so you have an idea of what you’re committing to legally.

Reasons you may need to find a lawyer to review a service include:

  • Onboarding New Vendor. A business needs vendors in order to operate effectively. In this circumstance, you may need to enlist a business lawyer to review someone else’s contract to make sure it is safe to sign.
  • Updating Current Contract. A business may have an old service contract they need reviewed and revised by a lawyer to make sure it has up to date terms.
  • Found a Template Online. Some business owners may cut corners by finding a free template online. Once they review it, they may want to get a second pair of eyes on it to make sure it covers what they need.

Breach of Service Contract

Client engagements can go poorly in some circumstances where they may be a potential breach of contract by one of the parties. Any breach of contract will require a review of the service contract and an analysis as to whether any of the terms were breached, which may lead to a business dispute.

Examples of when you may need to review a service contract for a potential breach of contract include:

  • Payment Issues. A client may have failed to pay an invoice or be disputing an invoice. In this circumstance, you may need to hire a lawyer to review your contract to know what your options are related to recovering payment. This may include sending a demand letter as a first step.
  • Service Delivery Issues. A client may have an issue with the services you have provided. In this circumstance, they may request a refund or terminate a contract early. If you think this is unfair, you may hire a lawyer to assess the situation.

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Drafting Service Contract Cost

Drafting a service contract comes with costs, since it requires the time of a trained lawyer to complete the project.

ContractsCounsel’s marketplace data shows the average service drafting costs to be $492 across all states and industries.

Service Contract Review Cost

Hiring a lawyer to review a service contract will come with fees. The lawyer will take time reading over the agreement to analyze the terms and consulting with the business.

ContractsCounsel’s marketplace data shows the average service contract review costs to be $450 across all states and industries.

How Do Service Contract Lawyers Charge?

Business lawyers charge for services in a variety of ways. Depending on the complexity of the project, the lawyer will typically suggest fee options to the client.

Hourly Rate

Many business lawyers prefer to bill hourly for their time. This means the lawyer will provide an hourly rate to be approved by the client and log time in a timesheet to be invoiced at the end of the project for time spent on the service contract. This is typically the safest way for the lawyer to charge clients since they are covered if the assignment takes more time than expected.

ContractsCounsel’s marketplace data shows the average hourly rate for a business lawyer ranges from $250 - $350 per hour.

Flat Fee

For contract drafting projects, flat fee billing structures have become more popular. Lawyers will provide a flat-fee to the client for approval. The benefit of flat fee billing is it provides certainty to the client on the total cost of the project. Always make sure you know what is included in the fee before starting, as it may not include rounds of revisions.

ContractsCounsel’s marketplace data shows the average flat fee rate for service contract costs to be $479.55 .

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