The basis of every contract or business relationship is churning out excellent deliverables. However, the word ‘excellent’ is only relative when it comes to contracts. From the onset of any project, it is important that a client gets an idea of what to expect from a service provider or contractor. The proper way to lay out these expectations is through a service agreement.
A PSA is typically used by a client and a hired professional to lay out in clear terms, the quality of expected deliverable, among other things. This article discusses in detail all you need to know about a professional service agreement.
What Is a Professional Services Agreement?
A professional services agreement is a contractual document used to hire a professional or organization to take on specific tasks or provide particular services to the client. The tasks defined by the document would usually attract a form of remuneration on completion of the job following the provisions of the document.
The professional services contract is typically used by a client who needs to hire the services of an independent contractor. The relationship between the client and the contractor is usually a ‘contract for service’ as opposed to a ‘contract of service’ that exists between an employer and his/her employees. A relationship cemented by a professional services agreement is usually preferred over a subcontractor relationship for a job with limited scope or duration.
Get a Free Professional Service Agreement Template to Outline Your Expectations
As a legally binding contract, a professional service agreement protects both the contractor and the client from any misunderstanding on the quality of service provided.
Download our professional services agreement template and take the first step towards creating your PSA to spell out the terms of the contract, the expected deliverable, and other important details.
What Should Be Included in a Professional Services Agreement?
Every professional services agreement template should contain the following elements:
- Services: Here, the contractor agrees to carrying out the job in a timely and professional manner.
- Compensation
- Terms of agreement
- Conditions of termination
- Relationship: In this section, both parties must attest to an understanding that the hired professional is only a contractor and not an employee, hence, not entitled to the client’s employment benefits.
- Changes: In this section, it is highlighted that the client may order for modifications, deletions or additions. All changes to be made are ordered using what is called a change order.
- Consultant responsibilities
- Work Quality: The expected work quality is highlighted in this section
- Indemnification and Insurance
Why Is a Professional Services Agreement Important?
A professional services agreement is important for the following reasons:
- Limits misunderstandings between the parties involved
- Helps the hired professional/contractor understand the quality of the deliverable the client expects
- Defines the terms of agreement
- Highlights conditions under which the arrangement can be terminated.
A professional services agreement arrangement should be used when the task at hand is well-defined, specific in nature and requires high technical skill. It is mostly used when the services rendered are way beyond the technical abilities of the client company’s staff.
Services provided under this kind of agreement should be infrequent and not need so much maintenance. Should maintenance be involved, it should be such that it can be well handled by the client’s organization
What Is the Difference Between a Professional Services Agreement and Subcontract?
There are major differences between a professional service agreement and a subcontract arrangement. A professional services agreement is mostly used for one-time arrangements. The contractor or consultant in this case is referred to as a vendor. A subcontract arrangement is usually for a deeper relationship, where the subcontractor is more involved in what the client does and for a longer period too.
In general, a contractor is called a vendor if it:
- Provides goods or services to support the progress of the project
- Is not subject to internal compliance programs
- Has several direct competitors who can provide the client with the same kinds of goods or services
A contractor is categorized as a subcontractor if it:
- Can make critical decisions concerning the project at hand
- Receives compensation for carrying out a project instead of supplying the client with goods or services
- Is in a place to determine who receives financial support
- Has outlined some performance goals which are consequential and score points when an evaluation of the overall project’s failure or success is calculated.
Get a Free Professional Service Agreement Template to Outline Your Expectations
As a legally binding contract, a professional service agreement protects both the contractor and the client from any misunderstanding on the quality of service provided.
Download our professional services agreement template and take the first step towards creating your PSA to spell out the terms of the contract, the expected deliverable, and other important details.
A detailed professional services agreement is important for any client-consultant business relationship as it highlights from the get-go the quality of the deliverable to be expected. Are you clueless as to how to draft one? CocoSign has several simple employment agreement templates for you to try
DOCUMENT PREVIEW
PROFESSIONAL SERVICE AGREEMENT
I. The Parties. This Professional Service Contract (“Agreement”) made ___________________, 20____ (“Effective Date”), is by and between:
Professional: ___________________, with a mailing address of ___________________, City of ___________________, State of ___________________ (“Professional”),
AND
Client: ___________________, with a mailing address of ___________________, City of ___________________, State of ___________________ (“Client”),
Professional and Client are each referred to herein as a “Party” and, collectively, as the "Parties."
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and agreements contained herein, the Client hires the Professional to work under the terms and conditions hereby agreed upon by the Parties:
II. Term. The term of this Agreement shall commence on ___________________, 20____ and terminate: (check one)
☐ - At-Will: Written notice of at least ____ days’ notice.
☐ - End Date: On ___________________, 20____.
☐ - Other: _______________________________________________________.
III. The Service. The Professional agrees to provide the following: _____________________________________________________________________
_____________________________________________________________________.
Hereinafter known as the “Service”.
Professional shall provide, while providing the Service, that he/she/they shall comply with the policies, standards, and regulations of the Client, including local, State, and Federal laws and to the best of their abilities.
IV. Payment Amount. The Client agrees to pay the Professional the following compensation for the Service performed under this Agreement: (check one)
☐ - $____ / Hour
☐ - $____ / Flat Rate
☐ - Other: _______________________________________________________.
Hereinafter known as the “Payment Amount”.
V. Payment Method. The Client shall pay the Payment Amount: (check one)
☐ - After Each Service Request
☐ - Daily
☐ - Weekly
☐ - Bi-Weekly
☐ - Monthly
☐ - Other: _______________________________________________________.
Hereinafter known as the “Payment Method”. The Payment Amount and Payment Method collectively shall be referred to as “Compensation”.
VI. Retainer. The Client is: (check one)
☐ - To pay a retainer in the amount of $__________ to the Professional as an advance on future Services to be provided ("Retainer"). (check one)
☐ - Retainer is Refundable.
☐ - Retainer is Non-Refundable.
☐ - Not required to pay a retainer before the Professional is able to commence work.
VII. Inspection of Services. Any Compensation shall be subject to the Client inspecting the completed Services of the Professional. If any of the Services performed by the Professional pursuant to this Agreement are defective or incomplete, the Client shall have the right to notify the Professional, at which time the Professional shall promptly correct such work within a reasonable time.
VIII. Return of Property. Upon the termination of this Agreement, all property provided by the Client, including, but not limited to, cleaning supplies, uniforms, equipment, and any other items must be returned by the Professional. Failure to do so may result in a delay in any final payment made by the Client.
IX. Time is of the Essence. Professional acknowledges that time is of the essence in regard to the performance of all Services.
X. Confidentiality. Professional acknowledges and agrees that all financial and accounting records, lists of property owned by Client, including amounts paid, therefore, client and customer lists, and any other data and information related to the Client’s business is confidential (“Confidential Information”). Therefore, except for disclosures required to be made to advance the business of the Client and information which is a matter of public record, Professional shall not, during the term of this Agreement or after its termination, disclose any Confidential Information for the benefit of the Professional or any other person, except with the prior written consent of the Client.
a.) Return of Documents. Professional acknowledges and agrees that all originals and copies of records, reports, documents, lists, plans, memoranda, notes, and other documentation related to the business of the Client containing Confidential Information shall be the sole and exclusive property of the Client and shall be returned to the Client upon termination of this Agreement or upon written request of the Client.
b.) Injunction. Client agrees that it would be difficult to measure damage to the Client's business from any breach by the Professional under this Section; therefore, any monetary damages would be an inadequate remedy for such breach. Accordingly, the Professional agrees that if he/she/they should breach this Section, the Client shall be entitled to, in addition to all other remedies it may have at law or equity, to an injunction or other appropriate orders to restrain any such breach, without showing or proving actual damages sustained by the Client
c.) No Release. Professional agrees that the termination of this Agreement shall not release him/her/they from the obligations in this Section.
XI. Taxes. Professional shall pay and be solely responsible for all withholdings, including, but not limited to, Social Security, State unemployment, State and Federal income taxes, and any other obligations. In addition, Professional shall pay all applicable sales or use taxes on the labor provided and materials furnished or otherwise required by law in connection with the Services performed.
XII. Independent Contractor Status. Professional acknowledges that he/she/they are an independent contractor and not an agent, partner, joint venture, nor an employee of the Client. Professional shall have no authority to bind or otherwise obligate the Client in any manner, nor shall the Professional represent to anyone that it has a right to do so. Professional further agrees that in the event the Client suffers any loss or damage as a result of a violation of this provision, the Professional shall indemnify and hold harmless the Client from any such loss or damage.
XIII. Safety. Professional shall, at his/her/their own expense, be solely responsible for protecting its employees, sub-Professionals, material suppliers, and all other persons from risk of death, injury or bodily harm arising from or in any way related to the Services or the site where it is being performed (“Work Site”). In addition, Professional agrees to act in accordance with the rules and regulations administered by federal law and OSHA. Professional shall be solely responsible and liable for any penalties, fines, or fees incurred.
XIV. Alcohol and Drugs. Professional agrees that the presence of alcohol and drugs are prohibited on the Work Site and while performing their Services. If the Professional or any of their agents, employees, or subcontractors are determined to be present or with alcohol or drugs in their possession, this Agreement shall terminate immediately.
XV. Successors and Assigns. The provisions of this Agreement shall be binding upon and inured to the benefit of heirs, personal representatives, successors, and assigns of the Parties. Any provision hereof which imposes upon the Professional or Client an obligation after termination or expiration of this Agreement shall survive termination or expiration hereof and be binding upon the Professional or Client.
XVI. Default. In the event of default under this Agreement, the defaulted Party shall reimburse the non-defaulting Party or Parties for all costs and expenses reasonably incurred by the non-defaulting Party or Parties in connection with the default, including, without limitation, attorney’s fees. Additionally, in the event a suit or action is filed to enforce this Agreement or with respect to this Agreement, the prevailing Party or Parties shall be reimbursed by the other Party for all costs and expenses incurred in connection with the suit or action, including, without limitation, reasonable attorney’s fees at the trial level and on appeal.
XVII. No Waiver. No waiver of any provision of this Agreement shall be deemed or shall constitute a continuing waiver, and no waiver shall be binding unless executed in writing by the Party making the waiver.
XVIII. Governing Law. This Agreement shall be governed by and shall be construed in accordance with the laws in the State of ___________________.
XIX. Severability. If any term, covenant, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.
XX. Additional Terms & Conditions. _______________________________________
______________________________________________________________________
______________________________________________________________________
XXI. Entire Agreement. This Agreement constitutes the entire agreement between the Parties to its subject matter and supersedes all prior contemporaneous agreements, representations, and understandings of the Parties. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by all Parties.
IN WITNESS WHEREOF, the Parties hereto agree to the above terms and have caused this Agreement to be executed in their names by their duly authorized officers.
Client’s Signature _______________________ Date ____________
Print Name _______________________
Professional’s Signature _______________________ Date ____________
Print Name _______________________
