contract
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This article is written by Nirali Shah who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

An Interim Services Agreement is a separate ad-hoc/ additional contract from the main agreement proposed to be entered into by the parties; where one party is the service provider and the other is service recipient. It regulates the interim arrangements such as intervening/interim services by a service provider to its client within the interests of time. These services may include the appointment of an interim managerial head in any school, organization, or other areas in the requirement of similar sort of services. 

For example: insurance services, transition services, employment services, consultation services due to winding-up or liquidation of a company are some of the real illustrations of the Interim Services Agreement. 

Purpose

It’s for a service which will not require to have a full-time contractual and one is required post the term of the Agreement that these services are no longer aware of.

Now when anything is in an interim arrangement, one will want to protect few things, such as:

  • Confidential Information;
  • Rights as a person engaged in such interim services;
  • Such services should be explicitly stated (because in case of dispute, the litigation is based on what were the services to be rendered under this Agreement).

Examples:

  • Interim consultation services: An outsourced CFO appointed to provide consultation to the company, in which the CFO is appointed, to solve cash flow discrepancies. 
  • Interim insurance services: Short-term life insurance is one of the interim insurance services provided to the employees, who have changed their jobs, for covering risks during the gap period of leaving the job and getting a new employment. 

Important clauses of an Interim Services Agreement

Definitions

There could be terms which are used many times throughout an agreement. Similarly, definitions tend to make interpretation and reading of an agreement simpler and concise and reduce ambiguity. A defined term used anywhere in the agreement refers to the defined person or entity or process.

Scope of services & Engagement

The reach of the services clause would be one of the most significant clauses for a customer. The customer and the service provider identify their requirements for the job within the framework of the interim service clause. As a consumer, one will want to make sure that the service scope clause perfectly encompasses the job he wants to do. If it is too large, the provider of services will do more than you want them to do. If it is too narrow, the provider of services could do less. To ensure the job will be exactly what you expect, it is extremely important to review the nature of the service clause in detail.

What services your company will receive is specified in the scope of services section. For example, if a clothing supplier produces a swag for your start-up, you would want to include an itemised list of items, any additional services (i.e. warehouse storage, shipping costs, etc.) in this section. This section should be exhaustive and exact.

The clause can be drafted as below

The Client pursuant to the Contract engages the Service Provider to provide the Interim Services to the Client and the Service Provider agrees to provide the Interim Services for the Term upon the terms and conditions to this Contract.

  • The Service Provider recognizes the time constraints in relation to conclusion of the Definitive Agreement and the need to meet certain deadlines. Accordingly, the [Service Provider] undertakes [to comply] with any agreed timetable in respect of provision of the Interim Services and any applicable Client procedures or policies in relation to the Interim Services.
  • The Service Provider shall have no right to bind the Client or enter into any agreement on the Client’s behalf.
  • Unless otherwise agreed by the Parties in writing, the Client shall at its own sole cost supply to the Service Provider with all necessary documents or other materials and all necessary information relating to the Interim Services, within sufficient time to enable the Service Provider to provide the Interim Services in accordance with the Contract. 
  • The Interim Services shall reasonably practicable be provided in accordance with the specification as set out in the Services Sheet but subject to these Contract Terms and shall be performed at such times as.
  • The Client shall provide all reasonable co-operation to the Service Provider, in all matters pertaining to the performance of Service Provider’s obligations under the Contract. 
  • Throughout the Term of the Contract:

a. the Client shall afford the Service Provider such access to the Client’s information or records and other materials relevant to the Interim Services as the Service Provider may reasonably require in connection with or in order to properly provide the Interim Services;

b. the Parties shall assume responsibility for complying with all [relevant/applicable] laws and regulations in connection with the Interim Services. 

  • The Service Provider does not guarantee, warrant or undertake on behalf of any third-party supplier or any products or services or service provider that access to any facilities will be uninterrupted or of any particular level of availability or quality.

Payment

Payment refers to the action or process of paying someone or something in exchange for goods/services rendered to them. When it comes to interim service agreement here it means the consideration paid by the client to the service provider for providing the interim services as mutually agreed.  

The portion that specifies the terms of payment is relevant and should include how much, where, and how compensation will be earned by the provider. In order to secure the services, the company may usually need a deposit which may involve a balloon payment or series of payments over the duration of the service. Note the payment plan, or you are likely to owe late fees or be in breach of the contract. For best practices and to ensure that you access all the requested services, ask for a clear statement describing the overall cost. This itemized statement should be included in the service agreement as an exhibit.

The clause can be drafted as below

Subject to the provisions of clause below, of these Contract Terms, the Service Provider’s charges or expenses in respect of the provision of the interim services shall be incorporated into the Definitive Agreement and paid in accordance with its terms.

  • In the event that the contract is terminated by the client at anytime prior to the execution and entry into the Definitive Agreement, the Service Provider shall be entitled to payment of its Charges (together with reasonable and properly incurred pre-approved actual costs and expenses) subject always to an aggregate maximum sum of INR XXX immediately.
  • Subject to the foregoing clauses as agreed in writing by the Parties, the Client shall pay the fees or charges and expenses or any costs which are agreed between the Service Provider and the Client for the provision of the Interim Services. 
  • The Service Provider shall not be entitled to vary its standard Charges at any time during the Term.
  • All Charges and sums quoted payable to the Client under the Contract are exclusive of any taxes, for which the Client shall be additionally added at the applicable rate from time to time.
  • If payment is not made on the due date, the Service Provider shall be entitled, without limiting any other rights it may have, to charge interest on the outstanding amount at the rate of 3%, above the base rate from time to time.

Client obligations

What are your unique commitments? Usually, there would be some things that you, as the customer, are expected to do in a service-based contract. The service provider may have a reason for not doing the work they promised if you don’t do these particular things. This is often the source of disagreements between parties. It would be painful to end up in a situation in which the service provider did not finish the job and blamed you for it. To ensure that you will satisfy all of your responsibilities, study this clause carefully.

  • Sub-contractor permissions

Is it permissible for the use of subcontractors by your service provider? This could make sense in certain service-based contracts. It won’t make sense in some, such as more personal service-based contracts. Particularly if a prototype document is used by your service provider, they might have given themselves permission to use subcontractors if you don’t want that to be the case. Until signing, ensure that you read through this clause.

The clause can be drafted as below

No agency:

Nothing in this Contract Terms shall be deemed to grant the Service Provider any right of agency or appoints the Service Provider an agent of the Client.

OR 

The Service Provider shall be entitled to employ subcontractors to carry out any of the Interim Services as a part or whole and shall be entitled at all times in its sole discretion.

Amendment

The amendment section describes how if the conditions (i.e. scope of services) change over the course of the partnership, the parties may change the agreement. Usually, to amend the agreement, written consent of both parties is required.

The clause can be drafted as below

  • Amendment – This agreement can be amended only in written form and signed by both parties.
  • Assignment – This Agreement may not be assigned by either party without the consent of the other party in written form.

Termination

This chapter explains how the parties can terminate the relationship and who is liable for such an incident. If any party commits some unlawful act, for instance, the act may constitute a violation of the agreement. Or, if the promised services are not completely executed by the service provider, they may be in violation of the agreement. Often, if the customer does not pay for the services rendered, then the customer is in violation of the contract. Or, if the parties agree to end the relationship without any strings attached, by written consent.

The clause can be drafted as below

  • The Contract may be terminated with immediate effect by the Client at any time upon written notice to the Service Provider before the Parties have signed and entered into the Definitive Agreement. 
  • The Contract shall terminate with immediate effect [and without notice] following signature and entry into the Definitive Agreement by the Parties.
  • The Contract may be terminated:

a. forthwith by either Party if the other commits any material breach of any term of these Contract Terms and which (in the case of a breach capable of being remedied) shall not have been remedied within [ten (10)] days of a written request to remedy the same.

b. forthwith by the Service Provider if the Client fails to make payment of any sums due hereunder on the due date.

c. forthwith by either Party if the other shall become unable to pay its debt or otherwise suffer insolvency events.

d. [forthwith the [Client]/[Service Provider]/[either Party] upon [written] notice to the Client in the event that the [Client]/[Service Provider]/[either Party] or its employees or agents shall engage in any conduct prejudicial to the business of the [Service Provider] /[Client]/[either Party] or in the event that [Client]/[Service Provider]/[either Party] considers [(in its reasonable opinion)] that a conflict or potential conflict of interest has arisen between the Parties.].

  • Any termination of the Contract and these contract terms shall be without prejudice to any other rights or remedies a Party may be entitled to under the Contract or at law and shall not affect any accrued rights or liabilities of either party nor the coming into or continuance in force of any provision which is expressly or by implication intended to come into or continue in force on or after such termination.

Exclusivity provisions

Are you allowed in the same or similar industry to work with other customers? It would be very unusual for a service agreement, which defines an independent contractor arrangement, to have an exclusivity clause so that you do not work with other customers. In fact, exclusivity clauses are only justifiable in employment relationships as a general rule, not for contractors.

If your Service Agreement includes an exclusivity clause, there should be a very good reason for it. If you are not sure about it at all, speak to the customer about why they think it is important. In a way that makes sense to you, they should be able to justify their logic. Re-negotiate this clause if they can’t.

Confidentiality

This clause safeguards corporate secrets and all sensitive information gathered during and after the course of the contractual relationship.

The clause can be drafted as below

The Service Provider shall keep confidential and only use for the purpose of this Agreement all Confidential Information and the Service Provider shall ensure that such information, documentation and materials are not disclosed to any third party without the client’s prior written consent. 

The obligations set out in aforesaid sub-clause, shall not apply to any information or part thereof which:

  • is already in the public domain or comes into the public domain through no fault of, or breach of this Agreement by the Service Provider or his sub-contractor or representative.
  • is disclosed to the Service Provider by a third party having a legal right to do so.
  • is developed by the Service Provider independently of any Confidential Information disclosed to the Service Provider by the Client.
  • the Service Provider is obliged to disclose by reason of any law or body having the force of law. In which case the Service Provider shall give the Client prompt advance written notice of the disclosure (where lawful and practical to do so) so that the Client has sufficient opportunity to prevent or control the manner of disclosure.
  • without prejudice to the aforesaid clause, upon demand the Service Provider will return to the Client all such Confidential Information and materials and all copies thereof.

Choice of Law

This clause describes how the conflict will be settled in the case of a dispute and what law applies. The parties will usually hold it close to home (i.e. in the state of the service providers). This provides a boost for local service providers doing business! Arbitration, mediation, and the use of common law courts are the most common forms of dispute resolution. 

The clause can be drafted as below

The interpretation, construction and enforcement of this Agreement and the Terms and Conditions and matters relating to them shall be governed in all respects by Indian law and the parties hereby submit to the exclusive jurisdiction of the XXX High Courts.

Dispute resolution

How would it be treated if you and your client fall into a disagreement? There should be a two-fold answer to this issue. Next, how are you going to deal with the initial disputes about the job? Are you going to have an amicable conversation? Do you need to get your messages written down? The contract should typically demonstrate how initial minor conflicts will be resolved. Second, how are you going to deal with a bigger conflict that’s more difficult to resolve? Sometimes, the parties will talk regarding arbitration in these arrangements. A binding, non-judicial way to settle disputes is arbitration. Be sure to read the contract, no matter what, so you comply with what is written.

The clause can be drafted as below

In case of any dispute or disagreement arising out of this Agreement, the parties shall:

  1. in the first instance, attempt to settle the same cordially.
  2. in the event of a failure to reach a cordial agreement, the dispute shall be referred to Arbitrator which shall be conducted in accordance with the provisions of Arbitration and Conciliation Act, 1996, or statutory re-enactment or any amendment thereof, as may be in force. 
  3. each party to the Arbitration will bear its respective costs relating to the arbitral proceedings. 

Liability insurance

Usually, this clause would enable all parties to receive a minimum amount of insurance for liability. The cost of insuring at the minimum standard versus accessing the services is necessary to weigh. If the cost is too high, you can decide to shop or try to negotiate the minimum down to something more affordable for a different service provider.

Warranty and Representation

This clause ensures that the parties to the agreement are competent enough to enter into any agreement. This clause includes a declaration by one party i.e. receiving party, that they are authorized to do such acts and have the required permissions, licenses, consents or authority to enter into the agreement.

The clause can be drafted as below

  • The Service Provider warrants to the Client that the Interim Services will be provided using reasonable care and skill.
  • The Parties warrant and undertake that throughout the term each of them has and will continue to have full authority to enter into this Agreement and to undertake each and all of the particular obligations on their respective parts contained herein.
  • The entire liability of the Service Provider to the client under or in connection with the Contract shall not exceed the amount of the charges paid, in any event. 
  • Each party agrees to indemnify and/or keep the other party fully indemnified from and any claim, loss or liability whatsoever incurred or suffered by any party as a result of default or negligence by the other party, arising in connection with the Interim Services, together with claim, expense, damage or loss which the other party or any of its agents or subcontractors may suffer due to the negligence or breach of the other party.
  • The parties acknowledge that the allocation of risk in the aforesaid clause is reasonable in the circumstances having been taken into account in setting the level of the Charges and arrangements between the Parties.

General clauses

  • Entire Agreement: This Agreement and the terms and conditions constitute the entire agreement between the parties and shall supersede all other/ prior written or oral understandings or agreements of the parties concerning the subject matter hereof which may not be changed or terminated except as set forth in this Agreement. In the event of any conflict between the requisitions of this Agreement and the Terms and Conditions, the provisions of this Agreement shall prevail.
  • Conflict: In the event of any conflict between the provisions of these Contract Terms and the Services Sheet, these Contract Terms shall prevail. In the event of any conflict between the provisions of the Contract and these Contract Terms, the Parties shall adopt the meaning which best gives commercial efficacy to the Contract having regard to the Parties / Service Provider’s original intention.
  • Process AgentThe Client and Service Provider by this provision irreversibly authorizes the person/firm/entity, to accept service on its behalf of all legal processes. The services on the entity shall be deemed good for the Client. 
  • Status: The Parties shall agree that the Contract must not establish any relationship of joint venture, partnership, agency or franchise between the Parties except as otherwise expressly provided or agreed in written form.
  • Non-Assignment: Neither Party shall be entitled to assign, transfer, encumber (including by trust declaration, charge or other encumbrance) or otherwise dispose of all or any of its rights or obligations under this Agreement without the prior written consent of the other Party. 
  • Authority: Each Party warrants its power to enter into the Contract and has obtained all necessary approvals to do so.
  • Waiver: No waiver by either party of any default shall be considered as a waiver of any default of the provisions of this Agreement.

Remedies

Usually, the provision of remedies is very necessary in any contract. In the event of the other party violating the contract, this provision will address what either party will do. The remedy provision is even more important in service-based contracts. If you are unhappy with the service provider’s job, it should have a particular section that talks about what you, as a customer, should do. Without this particular clause, if your service provider doesn’t work in the way you wanted them to, you will be left with no choices.

Key Takeaway

An Interim Services Agreement is used where the full or contractual agreement is still being negotiated between the parties, but the parties need to start work immediately. Entering into a service agreement is a common business scenario but ensuring a comprehensive interim service agreement is in place is important.


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