Hiring a Service Provider for Just About Anything and Issues to Consider

When you’re hiring a service provider for your business or project, whether it’s a branding consultant, a public relations firm, a cleaning service or an asset manager, you’ll need to sign a contract.  Regardless of the type of service, many of the same issues arise.  Here are some considerations to keep in mind:

• What Are You Hiring the Service Provider to Do?  Carefully review the scope of services to be provided by your service provider.  Even better, draft this yourself.  Your service provider is going to try to charge you more for anything outside of this scope, so clearly spell out your requirements and expectations, and every deliverable (consider source codes and the like) you expect to receive.
• How Much Will You Really Pay?  Watch for language that certain work is an “additional service,” or an “exclusion.”  This means that you will pay extra.  For example, avoid limits on the number of revisions of work product, or the number of meetings with your team, particularly when the services will require approval of many stakeholders.  Note any proposed markups – would you agree to reimburse the service provider more than a taxi ride actually costs, for example?
• When Will the Services Be Completed?  Include milestone dates for completion of the services so that timing requirements are clear.  You can protect the service provider from delays due to events out of its control by including an extension of the completion dates.
• How Long Will the Arrangement Last?  If you are hiring your service provider to perform services for a specific period of time, clearly define the commencement and expiration dates.  If your arrangement has renewal options, address how the renewal is exercised and whether any of the terms change during the renewal periods.
• Who Will Own the Work Product?  If your service provider will be creating something unique for you, in most cases, you will want to own it.  If you say nothing, usually the service provider will continue to own its work product.  Consider whether you will want to use this work product at multiple locations or for different purposes, or prevent it from being used elsewhere. Be wary of agreeing to language that prevents you from owning the work product unless you have paid fees in full, as a fee dispute may hold up your overall project.
• What If You Need to Stop the Project? Consider whether you need the ability to terminate this arrangement, for any reason or no reason, temporarily or permanently, and how the service provider would be compensated in those circumstances.
• What About Your Competitors? Think about how you would feel if this service provider undertook similar work for a competitor, and whether it would be appropriate to agree on an exclusive arrangement for a limited period and/or geographic area.
• Who’s Working on Your Project? If there is a particular person at the service provider that you expect to be assigned to oversee your project, require that in your contract.
  What If Something Goes Wrong?  Your service provider should have adequate insurance and indemnify you for claims that result from its work.
• How Can You Protect Sensitive Information?  Restrict your service provider from disclosing your confidential information and your customers’ personal identity and credit card data.
• What If Your Sell Your Business?  Give yourself the right to assign the contract, if there is a possibility someone will be stepping into your shoes.  But don’t let your service provider do so, unless you approve the new provider.
• Will the Work Be Done Correctly?  Your service provider should be required to comply with all applicable laws, and have all necessary licenses to perform its services and give you clean ownership of its work product.
• Is Your Provider an Independent Contractor?  Add language that your service provider is an independent contractor, not your employee.  If your service provider is deemed your employee (which can happen even if your contract states otherwise), this will have many consequences in terms of liability, tax, insurance, benefits and other protections enjoyed by employees.
• What’s Buried in the Boilerplate?  Check the fine print.  Resist efforts by service providers to limit their liability to their fee, to a set amount, to insurance proceeds or to only certain kinds of damages.  Service providers should stand behind their work.
• How Do You Tackle All of This?  Prepare your own contract, rather than trying to work with the one from your service provider, so that you may address these issues appropriately and control the documentation.