Copyright 2008 The Prinz Law Office. Getting Started with Drafting a Services Agreement: A Brief Guide to the Elements and Key Considerations By Kristie

Copyright 2008 The Prinz Law Office.

Getting Started with Drafting a Services Agreement: A Brief Guide to the Elements and Key Considerations

By Kristie D. Prinz

Founder, The Prinz Law Office


Elements of the Agreement

I. Defining the Services Covered by Contract What services are to be purchased? Are there deliverables? Can you describe them

specifically? What is the timetable for receipt of the

deliverables? Are there identifiable milestones that need to be met other than the completion/ delivery date?



II. Defining the Payment Terms Will the payment be a fixed fee or by the hour? If by fixed fee, is the payment up-front, upon receipt

of the deliverable(s), or in installments? If by the hour, can you cap the total hourly fee? How promptly is payment due after receipt of an

invoice? Are there any penalties for late payments? Any

discounts for early payments?



III. Identifying Intellectual Property Will intellectual property be created? If so, which party owns that intellectual property? Does the non-owner want the right to license that

intellectual property? Should the license be exclusive or non-exclusive? What would the scope of the license include? What would be the terms of the license?



IV. Identifying any Confidential Information to be Exchanged

Will there be a one-way exchange of information, or a mutual exchange?

Will new know-how be created through the relationship? If so, whose owns that know-how?

What are the terms of the understanding to protect confidential information/ know-how?



V. Allocating the Risks What happens in the event of a termination by

either party? A breach by either party? A failure to meet the timetable or the milestones?

Is the contract dependent on one person? What happens if that person is unable to do the work for any reason?

What steps, if any, do you want to take to protect against a bankruptcy by either party?

Do you want to cap the total liability?



VI. Resolving Disputes What governing law applies? Do you want to resolve disputes between the

parties by litigation? Or by mediation/ arbitration?

If so, where should such a proceeding take place and if mediation/ arbitration, what rules apply?

Who bears the costs of any dispute resolution proceeding?


Key Considerations in Services Agreements

I. Confirming the Nature of the Relationship Is this relationship really an employment

relationship? Confirm compliance with IRS rules on

contractors. Who is really doing the work? The contractor or

another subcontractor? If so, additional issues may need to be considered.



II. Does the Contractor Actually Own theIntellectual Property that is Being Created?

If intellectual property is being created under the contract, it cannot be assigned or licensed unless the contractor actually owns what is being created. Requires clean chain of title.

Common problem in a variety of relationships. Contractor may not be knowledgeable of what is required to ensure clean chain of title.



III. Is the Confidential Information Really Protected?

If sensitive confidential information/ know-how is involved, does the agreement bind all individuals who will have access to information?

Pay attention to entity structure and issue of subcontractors.



IV. Assessing Clarity of Payment Terms

Do the payment terms require clarification to be understood?

Are milestones triggering payments defined precisely?

Have you addressed what happens if you are not paid promptly?



V. Assessing the Clarity of Services Terms Are the services to be performed and the

deliverables specified to the extent possible? Keep in Mind: Vague terms are almost

impossible to legally breach, also make relationship look more like employment relationship in cases where you hire individual

Are milestones precisely defined?



VI. Risk Planning Have all potential issues that could cause either

party to terminate been anticipated and addressed? Is the termination clause clearly drafted and does it

address what obligations remain and end at termination? Have you considered what would likely happen upon termination of either party?

Have you addressed limitation of liability? Indemnification? Dispute resolution?


CONTACT INFORMATION

Kristie D. Prinz, Founder

The Prinz Law Office

P.O. Box 1594

Los Gatos, CA 95030

[email protected]

www.prinzlawoffice.com

Phone: 408.884.3577 Fax 408.317.0316

mailto:[email protected]

http://www.prinzlawoffice.com/

Documents

Copyright 2008 The Prinz Law Office. Getting Started with Drafting a Services Agreement: A Brief Guide to the Elements and Key Considerations By Kristie