Service Contracts for Small Businesses: Should You Have One and What Should It Say?

On Behalf of | Feb 26, 2020 | Firm News |

If you are a small business owner, you have to make a lot of decisions. You may be the best at what you do, whether that’s plumbing, landscaping, or pest control, but you probably don’t know a lot about contract law. It is common for small businesses to make deals verbally and rely on a person’s word. You would follow through on what you said you would do, so of course you would expect your client to do the same, right?

Unfortunately, as many small business owners find out, not everyone does what they say they will. This may leave you struggling to collect payment for work you performed. Or, perhaps you and your client had different understandings of what you were supposed to do for them, or when you would be paid. These are all situations in which a written contract could be helpful. Sometimes big disagreements and even lawsuits can be avoided if the service provider and client both have a physical document to refer to that shows what you both agreed to.

If you are operating without a service contract, the bottom line is that you never know when a dispute may arise with a client, and it becomes simply your word against theirs when it comes to what you both agreed to. A contract might not always seem necessary, but there is always a chance that a time will come when you really wish you had one.

Now, what should a service contract say? The thought of drafting or finding a contract might seem terrifying if you are not a lawyer. Many contain terms and language most people don’t understand, but this is not necessary. When it comes right down to it, a contract is simply an offer to do something and an acceptance of that offer, which is often given by signature. It is always best to have a lawyer draft or at least review a contract, but many basic form contracts can be found online with a simple search. These can at least give you an idea of the type of contract you may want and how you want it laid out.

As for content, a good rule of thumb to follow when figuring out if a contract says what it needs to say is to ask yourself if it covers the W’s: Who, What, When, and Where. You may recognize these as four of the “5 W’s.” You don’t usually need the “Why” that usually accompanies the rest when it comes to service contracts; if you are a plumber and someone calls you to fix a leaky pipe, you probably both know why you are providing the service.

As for the rest, the “Who” would be the provider and the client, or in contract terms, the “parties.” The “What” would be the service to be provided. It is a good idea to be as specific as possible here. Specify exactly what will be fixed or done. If a client wants you to mow their lawn, say that rather than something like “lawn service” that can be easily misconstrued. As for the when, it is a good idea to say when you will perform the work or give a deadline for completion as well as stating the time the client will pay. If the client is providing multiple payments, say exactly when each payment is due. It is okay if this is relative to the performance of a certain task, as long as it will be clear when that point comes. The “Where” might seem obvious if you are providing home services or something similar. However, it is still best to put in the address where the work will be performed. A client might have multiple addresses, for example, and including the address where you will be working will make it clear that you are only providing service at one address. Also, if you are providing technical work, the “Where” could help specify what equipment or systems you are working on and create a limitation on the work you are agreeing to do.

The final aspect service contracts generally need to cover is “How Much.” This is often the most important factor in a contract and can relate to many terms, such as price, amount of work, service sessions, etc. There may be an amount or quantity that is specific to your line of work that needs to be included, as well. However, in all service contracts, price is essential. Both you and your client need to know exactly how much the client is paying you for the service you provide. If you are giving a discount, say that and make sure the contract includes the actual price. That way, a client can’t just say you agreed to a different price when it is time to collect payment.

This is by no means an exhaustive list of what needs to be included in service contracts, but more of a basic starting guide to help you figure out what is best to include for your business or line of work. And again, it is always best to at least have an attorney look over your contract, especially if it is one you plan on using consistently.