The service contract is a type of contract whereby the service provider performs work for the client and the client pays a fee for that work. One of the essential skills for those who are working in the field of providing service is drafting service contracts. Drafting service contract requires specialized knowledge of legal matters, business, and the operations of the service industry. However, understanding and applying flexible legal regulations, practical situations, etc. is relatively complicated. Therefore, in this article, TNTP will analyze the basic contents that the parties should pay attention to when drafting service contract.
1. Information about the parties to the contract
The parties to the service contract could be individuals or organizations. Individuals shall specify the following information: full name, citizen identification/passport, address, and contact information (phone number/email). The organization shall clarify the following information: name, tax identification number, address, contact information (phone number, email), full name, and position of the person signing the contract (legal representative or authorized representative), etc.
For enterprises, the contract shall be signed by the legal representative or authorized representative. The legal representative’s information is usually shown in the company’s charter and the business registration certificate. In case the one person signing the contract is not the legal representative, written authorization is required. Therefore, in order to avoid the risk of the contract being invalidated, the parties should request to present one of the aforementioned documents when signing the contract.
When entering into the contract, the client should pay special attention to the civil act capacity of the service provider, in other words, whether the service provider fully meets the legal requirements for providing the service or not, in order to avoid using the service of a party that does not have the right to provide the service. The civil act capacity of the service provider is determined in each case as follows: i) The service might only be provided with a certificate or diploma and must be registered with the competent state authority; ii) The service can only be provided after registering the operation with the competent state authority; iii) The service can be provided in cases where certificates and diplomas are not required and there is no need to register the operation with the competent state authority.
2. Subject matter of the service contract (scope of work)
According to the provisions of law, the subject matter of the service contract is the work that is capable of being performed, which is not prohibited by law, and which does not contravene social morals. Service activities within the scope of legal prohibition include the following cases: i) Prohibited activities are codified in legal regulations such as illegal cross-border transportation of goods, drug transportation, etc. ii) Activities that the service provider does not meet the conditions to perform it. Before performing certain services such as medical services, insurance services, legal services, etc., the service provider must satisfy the statutory conditions. Subjects that have not yet met the statutory conditions are not entitled to perform service provision activities. Therefore, before entering into a contract, the service provider needs to clearly determine whether the requested service is feasible, complies with legal prohibitions, and aligns with social ethics. Based on these considerations, the service provider can make a decision on whether to agree to provide the service or not.
In order to ensure the performance of the agreed contents and to limit possible disputes, the parties need to agree in the contract regarding the work and scope of work that the service provider must perform. The more detailed the content of the work, the more it will limit risks for the parties.
3. Service fee
The service fee shall be mutually agreed upon by the parties. Nevertheless, for many types of services, the State has regulations on service fees, such as medical examination and treatment services. Service providers might not require payment over the frame rate prescribed by the State.
The service price is the basis for calculating the service fee and directly affects the obligation of the client to pay for the service and the right of the service provider to receive a fee for the service. Therefore, the parties shall detail the service fee in the contract. Service fee might be specified as a specific amount, determined by a pricing formula, determined by a price list or pricing formula applied by another service provider, or by the price list of the service provider.
4. Payment method
The parties can agree on the payment in cash, transfer, or make a payment order to the bank, etc. The payment can be paid once or divided into several instalments corresponding to each period performing work. It can be made immediately after the parties sign the service contract or after the service is to be done, etc. The law allows the subject to freely choose the payment method but shall comply with the law on finance and accounting.
5. Service fee reduction
The client can stipulate a reduction of the service fee in the following two cases: the work provided is not as agreed; the work is not completed due time. In order to limit disputes, the parties shall agree on the reduction of service fees in the two cases above.
Unsatisfactory service provision shall be divided into the following two cases: i) Work results are not as expected in the service contract; ii) The process of performing work does not comply with the specifications recorded in the service contract. In order to reduce the amount in this case, the parties must describe in detail the work results or the work performed. Failure to describe in detail can lead to the result of the client not having enough grounds to request the reduction in service fee in the event of a breach by the service provider.
For non-timely completion of services, the client should specify the time limit for service completion, which is an important basis for determining whether the service provider has violations or not.
Above is the content of the article “Instructions for drafting fundamental terms in service contracts” that TNTP sent to readers. If you have any questions, please contact TNTP for the best support.