Do you supply services to your customers or clients? Or do you buy services for your business without reading the fine print? Chances are at some point or another you have entered into a deal where services are provided by or to you in exchange for payment. Whether it's IT support, trade services, consultancy, or software solutions, these relationships are often formalised through service agreements or service supply terms of trade. This is why service agreements or contracts are so important to your business. 

A service agreement isn't just paperwork. It is the foundation of a business relationship. These agreements outline who does what, when, and how disputes will be handled if things don't go to plan. When a service agreement is drafted right, it can protect businesses from misunderstandings, risks, and costly legal fights. When a service agreement is drafted poorly or signed without a review, it can leave a business exposed to both legal and commercial risk.

So, what makes a good service agreement and why are they important? In this article, we explore why service agreements matter and how having the right lawyer on your side can safeguard your business.

Service agreements: the foundation of business relationships

A service agreement is a legally binding contract between a service provider and their client or customer. It sets out the rule book for the service supply, including terms in relation to scope, deliverables, timelines, payment terms, and remedies if things go wrong.

At its heart, it ensures both parties know:

• What services are being provided, by who and for how long;

• How much those services will cost and the timing of when they will be delivered; and

• What happens if obligations or expectations are not met.

Clear and customised service agreements mean fewer disputes, better cash flow, and stronger relationships.

What should a service agreement include?

Parties

It may seem obvious, but each service agreement should identify the parties entering into it. Usually this includes identification via legal name and contact details, and where relevant, the Australian Business Number (ABN) or Australian Company Number (ACN). You also need to make sure that the entity that is signing the agreement is legally able to enter into and form the agreement. For example, when dealing with Trusts, it is the Trustee who is entering and signing the agreement on behalf of the trust.  

Term and Termination

The service agreement should also specify how long the agreement will last. This is called the term and can involve a specific period or continue until all services are delivered. There may also be the ability to renew and extend the term, depending on the relevant service being supplied. 

There should also be requirements for when a party can end the agreement. These are the termination rights and processes. Termination consequences and requirements are also important to include, such as transition-out requirements and requirements to pay fair early termination fees. 

Scope of services and deliverables

Every agreement should clearly set out the scope of the services. This is exactly what is being delivered as part of the service supply. This helps ensure everyone is clear on what is included in the service supply for the price. Clarity and detail are important because when the scope is not spelled out clearly, disputes can quickly arise. For example, if an IT provider is selling “support,” does that mean remote phone or online help during business hours, or does it actually mean 24/7 on-site assistance?

Pricing, payment terms, and invoicing

Pricing and payment can cause some of the biggest disputes when the parties are unclear about who is paying what and when. Clear clauses around pricing, invoicing, and late payment consequences protect both sides. Inclusion of progress payments at certain milestones or intervals is also important to protect the supplier from non-payment and the purchaser from delivery delays.  

If you want some further tips for protecting your business from non-payment, check out our earlier article: Protecting your small or medium business from non-payment.

Timeframes, milestones, and performance standards

A service agreement should also explain when work will be done and what standards apply. For instance, a software developer might agree to specific delivery dates to achieve specific project milestones or an IT managed service supplier may offer service-level targets. Parties should also be clear on whether timings are estimates or essential requirements.

Intellectual Property licensing and ownership

You will often see conditions regarding intellectual property. This is especially important if the parties are sharing or supplying their intellectual property to the other party for their use. These conditions will explain who owns the materials and whether a party has a right or a licence to use them for a particular purpose. 

If you want some further information about the types of intellectual property that can arise in service supply and how contracts can help protect intellectual property check out our earlier article: ‘What is intellectual property in your business and how can contracts protect it?'

Liability limits and indemnities

Inclusion of liability limits or exclusions is essential. You may find these in the form of a liability cap, which limits the amount that a party may be required to pay the other in the event of breach of the agreement or another claim, such as for negligence. You may also include liability exclusion clauses that prevent a party from claiming particular types of losses, such as indirect or consequential losses like lost opportunity or loss of data. 

On the flip side, the agreement could include indemnities, which in simple form is a promise to pay a party in the event: 

• they suffer a particular type of loss or damage; and

• A particular event or events occur.

A word of warning, however, your agreement may be subject to the Australian Consumer Law depending on the type of services being supplied and to whom. In this case, you will need to be careful not to include any unfair contract terms or use conditions that try to limit or contract out of the consumer guarantees.

Common types of service agreements used by businesses in Victoria

IT managed service agreements

These usually cover IT support and/or infrastructure and device management. The arrangement is often remote support via a helpdesk, but it could include onsite support. These agreements will often include support request and resolution response times, running of system backups and updates and security monitoring services. 

SaaS and software licensing agreements

Software suppliers and developers require these types of agreements to supply access and use of cloud-based and proprietary software for a user fee. These licence agreements cover the licensing requirements, permitted use and user restrictions, intellectual property and data ownership and licence or subscription payment terms. 

Hardware supply and maintenance agreements

This type of agreement covers the supply and ongoing maintenance of physical IT hardware and equipment. These contracts will generally outline payment and delivery details, risk and title of the hardware, warranty terms, repair and replacement requirements, and maintenance service levels. 

Consultancy agreements

Consultancy agreements are very common for the supply of many different types of professional services. These agreements usually contain the terms of engagement, including the scope of work to be performed and how the consultant will be paid, such as a fixed or hourly rate or payment based on certain milestones or deliverables. You will also usually find disclaimers and detailed confidentiality clauses in these contracts.

Why service agreements protect your business from disputes

Clarity on obligations and responsibilities

Misunderstandings often lead to disputes. By clearly defining service scope, payment terms, responsibilities and deliverables, service agreements can provide a set of clear rules and expectations for the parties to follow. 

Risk management and liability limits

Service agreements can include clauses that limit or exclude liability, require payment of indemnities when certain events and loss is suffered and allocate risk between the parties. This can:

• protect you from non-performance or failures, such as failures to deliver or meet quality standards; and

• address or reduce potential liability costs in the event of your own non-performance or failures.

The risks of using free or DIY service agreement templates

Free or low-cost templates might look appealing, but they may not reflect your industry, your risk profile, or current Australian laws. Common issues include:

• Missing or unenforceable clauses;

• Terms that breach the Australian Consumer Law; 

• Failure to cover dispute resolution, privacy or confidentiality appropriately; 

• Poor protection for intellectual property or data; and

• Uncapped liability or liability limits that go too far. 

Cutting corners upfront can cost far more down the track, especially if a dispute ends up in litigation. A specialised service agreement lawyer customises agreements to suit your business's unique requirements and service delivery while protecting you where you need it most.

How Victorian or Australian laws can impact your service agreements

Australian Consumer Law and unfair contract terms

The Competition and Consumer Act 2010 (Cth) is a national law that covers fair trading and competition practices by businesses, including in respect of service supply. It also contains the Australian Consumer Law in Schedule 2, which contains both the consumer guarantees and unfair contract terms. The Australian Consumer Law is highly significant when drafting service agreements and should be considered in light of the services being supplied and customers or clients who are accepting the agreement terms. 

The Australian Consumer Law is adopted and applied in Victoria under the Australian Consumer Law and Fair Trading Act 2012 (Vic).

Privacy obligations and data protection clauses

If your agreement involves handling personal data, clauses often need to reflect obligations in the Privacy Act 1988 (Cth) and the Australian Privacy Principles (APPs).

If you supply services to Victorian government departments, bodies or schools, chances are you may need to include obligations to comply with their governing privacy law, the Privacy and Data Protection Act 2014 (Vic) and the Information Privacy Principles (IPPs).

Requirements to comply with the Health Records Act 2001 (Vic) and Health Privacy Principles (HPPs) may also be found in a services agreement if the service supply involves the handling of health information in Victoria.

Occupational health and safety

Requirements to comply with the Occupational Health and Safety Act 2004 (Vic) and Occupational Health and Safety Regulations 2017 (Vic) also often feature in service agreements. These laws are important across all industries, imposing duties on employers, self-employed persons, and those who manage or control workplaces to ensure the health and safety of workers and others.

Industry-specific legislation

There may also be relevant industry-specific legislation related to the service supply that needs to be considered and included in the supplier obligations. For example, if providing building services or work the Building Act 1993 (Vic) or the Domestic Building Contracts Act 1995 (Vic) may apply.

Service agreements for IT & Tech companies

For IT and technology businesses, service agreements are often critical. These usually involve customised managed service delivery, complex licensing supply or re-sale, hardware supply, re-sale or leasing, service levels and intellectual property rights issues. Customers expect clarity on:

• Support service scope and delivery;

• Licensing rights and restrictions;

• Ownership of materials, software code or data;

• Service levels and uptime/downtime levels;

• Data security and data storage or backup obligations; and

• Termination, renewal terms and transition out processes. 

Getting these clauses right and customising the conditions for IT suppliers' service and product delivery not only protects against and reduces disputes, but it also builds trust with the customer. 

Service agreements for commercial properties and property managers

Property managers often manage agreements involving cleaning, maintenance, security, and repairs for commercial properties. Service agreements in this space should cover:

• Scope of work and hours of service;

• Defined deliverables and measures of performance;

• Insurance requirements for suppliers and contractors;

• Liabilities and indemnities for property damage or personal injury; and

• Dispute resolution processes.

For property professionals, having reliable, customised agreements tailored to their business's requirements reduces liability and keeps commercial tenants satisfied.

What to look for when reviewing a service agreement

When you're reviewing a service agreement for your business, it is important to look beyond the surface. Here are the key areas to focus on:

1. Clear and specific deliverables

The contract should clearly set out what services will be provided, when, and to what standard. Vague language like “as required” or “to be agreed” can create disputes later. Instead, look for measurable deliverables.  For example, “monthly IT system backups by 'ABC software program' with a 24-hour recovery time.”

2. Transparent pricing and payment terms

Make sure the pricing structure is easy to understand and calculate, and the schedule for invoicing and payment is clear. Hidden costs, automatic price increases, or unclear billing cycles can catch customers off guard. The agreement should cover whether fees are fixed, variable, or based on work completed or usage, and when invoices are due.

3. Balanced liability and indemnity clauses

Liability clauses specify who bears the risk if something goes wrong. A one-sided clause that places all the risk on your business can be unreasonable, especially if it is too wide or includes risk that you have no control over. Look for proportionality of the risk to the party that is in control of that risk. For example, both parties should take responsibility for their own negligence and contract breaches.

4. Reasonable termination rights

Contracts should explain how either party can exit the agreement. Watch out for long lock-in periods or termination rights that only benefit one party. Ideally, there should be a clear process for ending the agreement on reasonable notice, without excessive penalties beyond a party's loss or damage resulting from the early termination. 

5. Compliance with Victorian and Federal law

Service agreements must comply with local laws and industry regulations. This includes the Australian Consumer Law and privacy or data protection obligations. Having a lawyer review and consider the applicable law is vital. An agreement that fails to comply with legal requirements could expose your business to legal risks and financial penalties from regulators.

When to update or renegotiate service agreements

Service agreements are not meant to sit in a drawer gathering dust. As your business evolves, your contracts should evolve with you. Here are the key times to revisit your agreements:

1. When your business operations change

If you expand into new markets, add new services, or restructure your operations, your existing contracts may no longer reflect how you actually do business. Updating them ensures your legal protections keep pace with your growth.

2. When you introduce new technology or services

Rolling out a new software platform, product line, or delivery method often means different risks, responsibilities, processes and customer expectations. Service agreements should be updated to cover these new realities, from data security to service delivery and performance guarantees.

3. When laws or regulations are updated

Legislation changes all the time, from privacy and data protection laws to Australian Consumer laws. If your agreement is not compliant, it could be unenforceable or even expose you to financial penalties from regulators. A legal review ensures you're operating within the rules.

4. When a dispute highlights gaps

Sometimes you don't know a clause or requirement is missing until a problem arises. A dispute can reveal weaknesses in your agreement, such as unclear service levels or vague payment terms. Reviewing and updating your terms at this stage helps prevent the same issue from happening again.

How a lawyer can tailor service agreements to your needs

No two businesses are the same, and your contracts should not be either. A lawyer can help you move beyond “off-the-shelf” templates by drafting or reviewing service agreements that truly reflect how your business operates. Here's how:

1. Reflect your specific services and risks

Every business delivers services in its own way. A lawyer ensures the agreement captures the exact scope of your services, deliverables, and timeframes. They'll also consider your industry-specific risks and build in protections.

2. Ensure compliance with Victorian and Australian law

Contracts don't exist in a vacuum. They need to comply with Australian legislation, including Australian Consumer Laws, privacy obligations, and industry-specific laws. A lawyer helps make sure your agreements comply with relevant laws and include compliance obligations, rather than leaving you exposed.

3. Protect your intellectual property and data

For many businesses, intellectual property and data are their most valuable assets. A well-drafted service agreement sets out who owns what, how and what material can be used, and how confidential data must be protected. This is particularly critical in IT, SaaS, and tech services where licensing, code ownership, and client data security are front of mind.

4. Provide remedies if things go wrong

Even with the best intentions, issues can arise including late payments, service failures, or disputes. A tailored contract includes clear remedies and dispute resolution processes, so problems can be resolved quickly and fairly, while helping to maintain commercial relationship.

5. Reduce risks and build stronger relationships

By tailoring your service agreements, you're not just protecting yourself legally, you are also setting clear expectations that help prevent misunderstandings. Your contracts are a reflection on the way you do business. A customised agreement leads to smoother working relationships, fewer disputes, and greater confidence when entering into new partnerships.

FAQs about service agreements

What is a service agreement?

It is a legally binding contract between a service provider and a client or customer that outlines, among other things, the service scope, delivery, expectations, deliverables, payment terms, termination and liabilities.

Do I need a lawyer for a service agreement?

You could try to do it alone, but it may be risky. Having a lawyer on your side helps to ensure your agreement is clear, enforceable, protects your interests, and complies with relevant laws.

What happens if I don't have a service agreement?

Without a written agreement, disputes are harder to resolve. A contract provides evidence of the deal struck between the parties. Without it parties and courts will probably need to rely on emails, invoices, or arguments about verbal discussions all of which can be conflicting between the parties and have an uncertain outcome. 

Can I use an online template?

You can but it is unlikely to give you the protection your business needs and they may not be as easy to use as you think. Templates usually require user input to complete, so if you don't understand how to read it this can be tricky. Templates are also usually generic and may not reflect your business's unique industry, risks, or legal requirements. They can leave you exposed to disputes or penalties. A customised agreement will reflect your service delivery scope and will likely provide better protection. 

Are service agreements legally enforceable in Victoria?

Yes, provided they contain the essential elements of a contract (offer, acceptance, consideration, intention, and certainty).

How often should I review my service agreements?

At least every one to two years, or whenever your business changes significantly.

Safeguard your business with the right service agreement

Contracts should not be an afterthought. A well-drafted service agreement protects your rights, sets clear expectations, and minimises disputes. Whether you're in IT, technology, or commercial property, the right agreement can save your business time, money, and stress.

At SLB Legal, we specialise in drafting, reviewing and advising on service agreements for businesses. With years of experience, we help ensure your contracts are clear, compliant, and tailored to your needs.

Ready to protect your business? Contact SLB Legal today for a tailored service agreement review.

Disclaimer: The content in this article is not advice of any kind and is provided for general information and interest purposes only. You should always obtain independent legal or other professional advice, based on your own circumstances. 

Rights of use: SLB Legal Pty Ltd or Sarah Burke owns the content in this article (or has permission to use it). You are welcome to share this article online as is and unaltered, provided you credit us where appropriate and link to the site of this specific article.