This article is written by Aditya Sunil Naik pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
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This article shall help you understand the various terms and conditions one should include or look out for in a security service agreement. Whether you are the service provider or the client, you would be able to understand your interests that are to be protected while drafting the agreement. Moreover, you would be able to understand the potential areas for dispute and ensure that you draft your agreement in a way to avoid ambiguity or confusion. The nature of the agreement being sensitive, it is crucial that both parties agree on their rights and responsibilities clearly so that the purpose of the agreement is fulfilled.
What is a security service agreement?
A security service agreement is an agreement between a security service provider and a client for the provision of security services. The service may be for domestic or commercial purposes as per the requirements. Usually, domestic security arrangements are not very complex and just involve security guards to guard the entrances and exits and patrol the area.
On the other hand, commercial security arrangements vary according to the nature of security needed and the threat levels involved. For example, an office building may require security for general protection and controlling who can access different parts of the building. A public place like a mall or a cinema theatre may require security checks of guests and their baggage in addition to the general requirements. A large oil refinery or steel factory would require different kinds of security at different parts of the compound including protection for the storage areas, standby guards to respond to any emergency situation, and comprehensive peripheral security with round-the-clock protection.
Highly sensitive places like banks and treasuries may require security personnel armed with guns due to the nature of the subject matter being protected. This would require additional permissions and licenses as it entails the possession and potential use of weapons in a public place.
Therefore, it is clear that the specifics of the security arrangements required for a particular place depend on the facts and circumstances applicable and are highly variable in nature. Due to the critical nature of the function being performed, it is important and desirable to have the rights and responsibilities of both parties clearly set out to ensure that the object with which the agreement was entered into is achieved.
What are the terms and conditions to be included?
Before getting into the terms of the agreement, it is important for the parties to clearly lay down the background of the transaction. This would make the intention of the parties clear as well as their basic expectations about the agreement. In the event of any ambiguity or doubt, recital clauses help clarify such basic issues.
It is important to include the date from which the agreement would be effective and also the date from which the services would be provided to ensure clarity about the liabilities of the parties. The payment for services would usually begin only after the service has been provided and therefore it is a small but important clause to include.
Although it is not a clause generally used in such cases, if the client wants the service provider to fulfill some criteria to be eligible to start the provision of the service, it can be done by including a clause that would specify such conditions. An example of a condition precedent could be obtaining the relevant permits/ licenses from the authorities to provide security services. This can be coupled with the effective date clause, where the agreement would commence only on the effective date provided all conditions precedent are fulfilled.
The parties should specify the term for which the services shall be provided. If the parties wish, they may also specify that the agreement can be renewed on the expiry of the term for a period as may be fixed.
This clause should clearly specify the services that the security service provider shall be provided during the course of the agreement. It should include all relevant details like the number of guards, number of shifts, location of the guards in the premises, equipment used, if any, etc., and the charges applicable along with the taxes payable.
Payment and method of payment
This clause should specify the time when payment is to be made by the client. It can be monthly, quarterly, annually, or any other way the clients agree to. It is important to also mention that the client would be provided with a tax invoice before making the payment with the correct tax details for compliance purposes. Additionally, it is useful to mention that the payment that would be made shall be subject to any applicable deductions like TDS under any law in force. The service provider shall specify the manner in which the payment is to be made (cash, cheque, demand draft, wire transfer, etc.).
The parties must specify the circumstances and the manner in which the agreement can be terminated. Common circumstances for termination include expiry of the term of the agreement, insolvency of either party, revocation of the license of the service provider, or impossibility of parties to perform their obligations due to force majeure. A termination clause can also give the option to the client to terminate the agreement without assigning reasons. It would be advisable to also include a notice period for the termination of the agreement to ensure that the parties have sufficient time to make alternative arrangements. Moreover, it should also include the period from termination within which the personnel and equipment of the security service agency must vacate the premises being secured.
Governing law and dispute resolution
Another standard but important clause to include is the governing law and dispute resolution clause. This specifies the country whose laws would be applicable to govern the agreement. The dispute resolution part would specify a dispute resolution the parties may choose to use instead of approaching the courts directly. Such methods include negotiation, mediation, conciliation, and arbitration.
Breach, consequences of breach, and remedy
This clause shall specify what would constitute a breach of the terms of the agreement by either party and also specify the consequences of such breach. Usually, for breaches that can be cured/resolved, a certain grace period can be given to the breaching party to remedy the breach to avoid the agreement from being terminated. If the breach is not cured or cannot be cured, the agreement usually would stand terminated.
Especially in the light of the pandemic, the importance of this clause cannot be overstated. This clause would specify the occurrence of certain events that would absolve the parties of their duty to fulfill their obligations temporarily or permanently, as the case may be.
The parties can specify the manner in which any terms of the agreement are to be amended in the future.
This clause is another standard but important clause. It essentially states that each clause of the agreement is independent of the other and if any clause of the agreement were to be invalid/ illegal/ unenforceable, the remaining portion of the agreement would not be affected.
This clause is to override any previous discussions, oral understandings, representations, or promises that may have been made before the execution of the agreement. It states that the parties shall be bound only by the terms given in the agreement and nothing else. This is to avoid any dispute later on if a party claims that they were orally promised something by the other party.
This clause specifies the manner in which notices under the agreement shall be served on the other party. It is preferable to specify the physical as well as the e-mail address for the service of notice. Also, specify that either party shall communicate to the other party about the change in the said details within a specified period of such change.
This clause limits the institution of proceedings relating to disputes under the or about the validity of the agreement before the courts of a particular city only.
Importance of some terms and conditions of the agreement
Representations and warranties
Before entering into any agreement, both parties make representations of certain facts that the other would rely on to decide whether to enter into the agreement. In this case, a client may agree to engage a particular agency only if they have a certain track record, certification, or recognition of fulfilling a particular standard. The parties also specify certain warranties that each would fulfill during the course of the agreement, i.e., ensure that the staff provided are medically fit, provide equipment that is in good condition, follow best practices in the industry, etc. Breach of these representations or warranties could entitle the other party to seek compensation or terminate the agreement, based on the terms agreed upon.
Rights and duties of parties
It is important to specify the rights and liabilities of each party to an agreement clearly in the agreement to avoid any confusion or dispute. In the case of a security service agreement, the parties would have to decide certain matters such as who would be responsible for providing security booths, toilets, and parking facilities for the vehicles of the employees. Also, the parties must decide the procedure the security guards must follow while securing the building on matters such as entry/exit of personnel/ goods, opening and closing of certain areas, and their timings. These details may be given in a separate document that can be annexed to the agreement.
Another important issue to decide is the powers the guards would have to enforce these rules and guidelines and whether they would be authorized to use force and if so, to what extent. The client may also want to have the right to seek the replacement of a security guard found to be unfit or unsuitable for the work.
Relationship between parties
This clause is important to determine the nature of the employment of the security service provider on issues such as legal liability for any civil wrongs. The clause must specify whether the guards provided security service provider are acting as employees of the client or as independent contractors. This issue would also determine who would be liable to pay the guards for their services and other payments such as provident fund contribution and gratuity.
The breach of duties by one party could lead to a loss to the other. Moreover, an act of the guards employed could also lead to losses to a third person. This clause should clearly lay out who shall be liable to indemnify claims arising out of such losses. A party may also choose to limit its liability to a specified amount. The parties may also consider taking insurance for such liabilities.
Schedules or annexures
Any details such as the details of the premises to be secured, map of the same, specifications of the security standard to be provided, etc. can be included with the agreement in the form of a schedule or annexure to ensure that the agreement is restricted to the terms of agreement with the parties.
This article has listed the importance of certain clauses to a security service agreement. It would be useful to refer to these to ensure that the parties create a clear agreement with a proper demarcation of rights and responsibilities of both sides. Given the sensitive nature of the service provided, a small mistake could prove to be costly. Therefore, it is advisable to thoroughly vet the agreement to ensure that there are no discrepancies or grey areas. Taking the help of a legal professional is advisable to get a properly drafted agreement.
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