This article is written by Harsh Kedia, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.
Table of Contents
Introduction
Contracts are the legally enforceable agreements. As one person is not restricted to oneself for the business or any other activity, so in order to perform certain obligations or make the ends meet often two or more than two persons come together and for this a contract plays a very important role. Though it is not a written rule that one should come into a contract to perform some tasks but contracts make the procedure smoother and more efficient. If any of the parties breaches any of the conditions set out in the contract then the other party has the option of recovering the losses or damages from the other party legally. In short, a contract makes the parties legally bound.
Basic structure of a contract
Almost all the contract has a basic structure which includes effective date and the name of the parties at the top of the agreement. Then comes the recitals which briefly explains why this agreement is executed and then comes the main part i.e. all the conditions and rules in the form of clauses. This is the basic structure of any contract.
Drafting a contract is not an easy task and it requires some level of expertise. It is not possible for a small businessman to hire a legal advisor every time to draft a contract as in most of the cases the fees of drafting such contracts are very high. For this purpose, various free templates are available online which can be used as a standard contract between the parties. These templates can be modified according to the terms and conditions of the business or for the purposes the agreement is to be executed.
How to modify a predesigned contract template
In this article I’m going to discuss a sample staffing service agreement template which can be accessed by clicking here and I’ll try to modify it according to some particular conditions. Before proceeding further, you are requested to read the template provided in the above line to have a brief knowledge about how a Staffing Service Agreement looks like.
Staffing service agreements are executed when a company or any organization is in the need of some staff (generally blue-collar staff) and for this purpose such companies or organizations come into a contract with some other organizations which are engaged in the business of providing such workers.
According to the above attached staffing service agreement template, following are the clauses mentioned under it:
- Staffing firm’s duties and responsibilities
- Client’s duties and responsibilities
- Payment terms, bill rates, and fees
- Confidential information
- Cooperation
- Indemnification and limitation of liability
- Miscellaneous
- Term of agreement
Now let’s think of an agreement from the perspective of the principal employer i.e. the one who is going to hire the workers from the contractor (who will provide workers).
A Principal Employer will also try to reduce the liability from his side and transfer such liability to the Contractor. Though it is not possible to transfer every such obligation to the Contractor but if I am a lawyer of the Principal Employer then I will try to draft an agreement in such a way that the Principal Employer is safeguarded from all the possible issues which may arise in future. Following are the modifications which I will make in this agreement.
Scope of service
Under this agreement we can add a clause stating the Scope of Services of the parties. Scope of Service will cover what the principal employer and the contractor are obliged to do. This clause is different from the obligation clause. Scope of service just contains a summary of the major services which are to be provided by the parties. For example, in our agreement under Scope of Service we can say that “The Contractor shall provide temporary workers to the Principal Employer and shall assume full responsibility of shortlisting the prospective workers for the purpose of the agreement”. Now let’s understand this clause. If instead of giving the work of shortlisting workers from Contractor to the Principal Employer, then the Principal Employer will have to conduct some tests for which he shall incur some expenses. To avoid the expenses, we can transfer this service to the contractor.
We can also insert a clause saying “The Contractor shall conduct a background check of such workers who in the view of the Contractor is eligible to work under the Principal Employer. Such background checks shall include but not limited to criminal conviction record, interview, test the skills of the workers and any other legally required obligations which are needed for the purpose of this agreement”. By transferring these obligations to the contractor, the Principal employer could save himself from unnecessary expenses and he can also claim damages from the Contractor if in future such investigations turn out to be false.
Relationship of the parties
Another clause we can add in this agreement is mentioning the relationship of the parties. It is important because this will clearly define what type of relationship both the parties share and accordingly, they can determine the extent of their liabilities. For example, if there is a principal-agent relationship then for any acts of the agent the principal shall also be held liable. In order to avoid these types of circumstances it is always beneficial to incorporate such a clause which clearly identifies the relationship of the parties. In this agreement the Principal Employer will not want to hold some liabilities because of some acts of the Contractor. Therefore, a clause can be inserted saying “The Parties relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture or similar business relationship between the parties. Neither party is a legal representative of the other party, and neither party can assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other party for any purpose whatsoever”. This clearly states the nature of the relationship of the parties.
Obligations of the parties
Though it is mentioned under the template the responsibilities of the parties yet there are certain things which need to be added to make the agreement more effective. Obligation clause states what are the things a party needs to perform after executing this document. For example the employers who hires workers in for their industrial or manufacturing purposes then they are required to follow the rules mentioned under some acts like the Contract Labour(Regulation & Abolition) Act,1970, The Employees’ Provident Fund Scheme 1952, the Environment Protection Act, 1986, the Employees’ State insurance Act, 1948, etc. In order to save the Principal Employer from any problems which might arise in future due to non- compliance of the laws mentioned under these acts, it is very important to mention the obligations in it. In the same manner the Principal Employer can negotiate in the obligation clause of the contractor. In Staffing Service Agreement, the payments are made by the Contractor to the workers, therefore to ensure that the contractor makes the payment to the workers such obligation clause can be inserted. For example a clause saying “The Principal Employer shall nominate a representative duly authorized by him to be present at the time of disbursement of wages by the Contractor and it shall be the duty of such representative to certify the amounts paid as wages in such manner as may be prescribed” can be inserted.
Payment clause
Then comes the payment clause. Payment clauses should always be drafted keeping in mind any future problems which might arise. Commonly payment clauses determine the amount which in this case we often call Professional Fee which are to be paid to the contractor. Now suppose a situation in which a worker within one month or two months leaves the employment of the Principal Employer. What will happen in this case? Will the principal employer be obliged to make the payment for this short duration?
Obviously, this will be decided from the terms of the agreement but if such workers leave the employment within such a short period then the principal employer will suffer some loss. Also, to avoid such circumstances, the payment clause should strictly state the consequences of this issue. A clause can be inserted saying “Contractor agrees and acknowledges that in case the worker leaves the employment of the Principal Employer within three months from the date of joining then in such circumstances the Contractor shall provide a replacement with similar work profile as that of the previous worker. Such payment related to the previous worker shall be adjusted after getting a replacement from the Contractor. The Contractor shall be responsible for any fee of the worker in case the worker leaves the employment within three months”. Therefore, it will save the principal employer from hiring the workers again and again by incurring expenses.
Conclusion
These were the clauses which I tried to modify or add according to some circumstances. Often people rely on these types of templates when they can’t afford a lawyer who can draft a suitable agreement for them. But one thing which should be kept in mind while executing these templates is that these are not designed keeping in mind the commercial intent of the parties. Though these contract templates save time and resources by providing a pre-designed contract but on the other hand there is a lack of flexibility in terms of contract terms in these templates. Most of them don’t cover all the terms from a particular negotiation. They contain some common clauses which are included in any agreements. Therefore, it is very necessary to modify such templates according to the needs and circumstances.
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