Computer Services Agreement Basics

Q. What is a Computer Services Agreement?

A. A Computer Services Agreement is a contract - either written or verbal - which sets out the terms and conditions for service between a Customer and a Computer Service Provider. LawDepot provides a written Computer Services Agreement.

Q. Why isn't an oral Computer Services Agreement sufficient?

A. The problem with oral agreements is that they are difficult to prove. If a dispute arose, a court would have to hear evidence and decide whose version of the truth to accept. If there is a written agreement, courts will generally be obligated to uphold its terms even if they don't agree with them.

Q. What is addressed in a Computer Services Agreement?

A. Computer Services Agreements typically address the following:

1. the parties to the agreement;
2. the service being offered;
3. the term of agreement; and
4. the compensation that will be provided to the Computer Services Provider.

In addition, Computer Services Agreements may also provide specifics on:

1. how confidential information is to be treated upon the Computer Services Provider's termination;
2. whether there are limitations on the Computer Services Provider's ability to compete with the Customer's business upon the Computer Services Provider's termination; and
3. how disputes between the Customer and Computer Services Provider will be handled.

Q. Who are the parties to the Computer Services Agreement?

A. The parties to the Computer Services Agreement are the Customer and the Computer Services Provider. The Customer is the individual or business seeking the service while the Computer Services Provider is the individual or corporation providing the service. Computer Services Providers may sometimes be identified as "individual contractors", "freelancers" or "consultants".

Q. What is the difference between an Employment Contract and a Computer Services Agreement?

A. A Computer Services Agreement is a type of Service Agreement. Service Agreements are used to hire Services Providers or independent contractors, not employees. A Service Agreement is limited to a specific project or time period. Employment Contracts are used to hire employees.

Q. What is the difference between an employee and independent contractor?

A. Independent contractors are individuals who provide services for a fee but are not considered to be employees because they work for themselves and do not have an employer. Examples of independent contractors include those who operate their own practice or trade in fields such as plumbing, carpentry or graphic design or in more specialized technical settings such as accounting, engineering or computer programming.

The law treats employees and independent contractors differently, but it is not always easy to establish which category an individual falls into. In cases of dispute, courts will determine the appropriate category by examining a number of factors. Some factors will be considered more important than others. Examples of relevant factors are:

1. who is providing the tools for the job;
2. the level of skill required for the job;
3. who controls the work and the work product;
4. whether the hired party must provide oral/written progress reports;
5. whether the job is performed on the business premises;
6. the duration of the relationship between the parties;
7. the ability to delegate or sub-contract the job of the hired party;
8. whether the hired party has discretion over how long and when they work;
9. whether any insurance or benefits are provided to the hired party;
10. whether the hired party's expenses are reimbursed;
11. whether the hired party can realize a profit or loss;
12. whether the work is part of the regular business of the hiring party;
13. whether the parties have a written agreement defining the status of the hired party;
14. the method of payment; and
15. the way the hired party is treated by taxing authorities.

Term of Agreement

Q. What is the end date of the agreement?

A. The end date is the date when the services under the agreement are no longer provided or needed.

Q. What does "notice" mean?

A. Notice refers to the amount of time that is provided by one party to another when they wish to end their obligations under the agreement prior to the agreed end date. The purpose of notice is to allow the Computer Services Provider to find other employment or the Customer to find a replacement Computer Services Provider. In most jurisdictions, the law does not offer independent contractors the same minimum notice protection that is typically offered to employees (unless the notice is expressly provided in the agreement). However, courts may award notice (or pay in lieu of notice) to an independent contractor if he/she can show that he/she was economically dependent on the Customer. In those circumstances, courts may impose a reasonable notice period or damages.

Compensation

Q. How should the Computer Services Provider be paid?

A. The Computer Services Provider can be paid or compensated in many different ways. If the Computer Services Provider will be paid a certain amount (rate) for each time period, use "Hourly", "Weekly", "Monthly" or "Yearly" as appropriate. If the Computer Services Provider is to be paid a certain fixed amount for the complete performance under the agreement, use "Fixed Amount". If the compensation is several payments or involves the trade of services or goods, use "Other". If you have a certain rate for the services performed together with additional compensation, use this question for the basic rate and use the "Additional Compensation" question to describe the additional compensation.

Q. Which currency should I select?

A. Select the form of currency for all monetary amounts (compensation, expenses, etc.) referred to in this agreement.

Q. What is additional compensation?

A. Additional compensation refers to any compensation the Computer Services Provider will be paid in addition to the basic compensation specified under the question "How will the Computer Services Provider be paid?".

Q. What items should be provided to the Computer Services Provider?

A. If the Customer wishes to provide any services, tools, office space, materials, etc. to the Computer Services Provider to perform the services, then the Customer should select "Yes" to the question "Will the Customer be providing anything to the Computer Services Provider?" and then describe what he/she is providing.

Q. What does "Penalties for late payment?" mean?

A. This question refers to whether the Customer will be penalized for failing to pay the Computer Services Provider on time. Select "Do not specify" to not mention whether there will be penalties for late payment. Select "No" if the Agreement will expressly state that there are no penalties for late payment. Select "Yes" to be able to expressly state what the penalties will be for late payment.

Q. What does "Penalties imposed for non-performance of the services in a timely manner?" mean?

A. This question refers to whether the Computer Services Provider will be penalized for failing to perform the services on time. Select "Do not specify" to not mention whether there will be such penalties. Select "No" if the Agreement will expressly state that there are no such penalties. Select "Yes" to be able to expressly state what the penalties will be for failing to perform the services on time.

Restrictive Covenants

Q. What is a confidentiality clause?

A. The confidentiality clause prevents the Computer Services Provider from using or disclosing the Customer's confidential business information to a third party.

Q. What is a non-competition clause?

A. The non-competition clause prevents the Computer Services Provider from competing with the Customer.

Q. What is a non-solicitation clause?

A. The non-solicitation clause prevents the Computer Services Provider from inducing others to leave the Customer's employment.

Q. What is the difference between a non-competition clause and a non-solicitation clause?

A. A non-competition clause prevents the Computer Services Provider from unfairly competing with the Customer after the employment is terminated. This means that when the Computer Services Provider's work comes to an end, he or she cannot take a job at a business which is in direct competition with the Customer. A non-solicitation clause prevents the Computer Services Provider from inducing other employees or contractors from leaving the Customer or from interfering with the Customer's relationship with other employees in general. This means that the Computer Services Provider cannot invite the Customer's employees to move with him or her to another workplace. Courts MAY NOT enforce a non-competition or non-solicitation clause if:

1. the clause could be injurious to the public (e.g. if it could depress the local economy);
2. the clause is broader than necessary to protect the Customer;
3. the clause would cause undue hardship on the Computer Services Provider (e.g. it would make it difficult for the Computer Services Provider to find new work); or
4. the clause has unreasonable time and geographic restrictions.

Q. What geographic restrictions can the Customer make in the non-competition clause?

A. You can only prevent a service provided from engaging in a business that competes with your business within a geographic area large enough to protect your business. The restriction must be reasonable so that the service provider is not restricted from engaging in his or her usual trade in an area that could not affect your business.

Dispute Resolution

Q. What do "mediation" and "arbitration" mean?

A. Mediation is a process where an impartial 3rd party or mediator facilitates the negotiation of a settlement between parties to a dispute.

Arbitration is a process whereby parties to a dispute mutually agree to an impartial referee who hears and makes a binding decision.

Both processes are superior to the court process when there is a long term relationship involved and the survival of the business relationship is desirable. These processes can be less expensive, more expedient, and more efficient than the court process.

Miscellaneous

Q. What is contained in the standard clauses?

A. Our standard clauses are those clauses which are most often included when creating a Computer Services Agreement. Some of the clauses deal with:

1. assignment;
2. the capacity of the independent contractor;
3. modification of the agreement;
4. time being of the essence; and
5. severability of invalid or unenforceable clauses.

If you don't want all these clauses in your agreement, select 'No' and you can pick and choose which clauses to include.

Q. What does the Assignment clause do?

A. The assignment clause prevents the Computer Services Provider from transferring their rights or responsibilities to another party without the Customer's consent.

Q. What does the Capacity/Independent Contractor clause do?

A. The capacity/independent contractor clause reiterates that the Service Provider is hired as an independent contractor or consultant and not as an employee of the Customer.

Q. What does the Modification of Agreement clause do?

A. The modification of agreement clause states that any changes to the agreement must be made by written consent of all the parties to the agreement.

Q. What does the Time of the Essence clause do?

A. This clause provides that all dates and time limits are strictly enforced.

Q. What does the Entire Agreement clause do?

A. The entire agreement clause confirms that there are no other provisions or terms outside of this agreement.

Q. What does the Severability clause do?

A. The severability clause declares that if the courts find that a particular clause of the agreement is invalid or unenforceable, the validity of the remaining provisions of the agreement will not be affected.

Q. What does the Return of Property clause do?

A. The Return of Property clause states that the Computer Services Provider will return all property belonging to the Customer upon termination of the Agreement.

Q. What does the Limitation of Liability clause do?

A. This clause allows the parties to completely absolve the Computer Services Provider in the event that any losses, damages or any other liabilities arise out of the services provided.

Where this clause is selected, the contract cannot also have an indemnification clause.

Q. What does the Indemnification clause do?

A. An indemnification clause is where the Computer Services Provider agrees to pay back the Customer for claims made against the Customer by any third party for any damage or loss arising out of the provision of the services.

Where this clause is selected, a limitation of liability clause cannot be selected.

Q. What does the Legal Expenses clause do?

A. The legal expenses clause reiterates that legal costs and fees associated with any legal action will be awarded to the successful party.

Q. What does the Notice clause do?

A. The notice clause indicates how all notices under this agreement will be given.

Q. What does the Enurement clause do?

A. The enurement clause declares that any rights and responsibilities of the parties will pass on to their successors.

Q. What does the Titles/Headings clause do?

A. The title/headings clause states that the titles/headings of each section are inserted for clarification only and are not for purposes of interpretation.

Q. What does the Gender clause do?

A. The gender clause declares that words in the singular or masculine sense also encompass words in the plural and feminine sense, respectively.

Q. What does the Waiver clause do?

A. The waiver clause states that if one party waives its rights to enforce a breach by another party, this failure to enforce its rights will not be held as a waiver of any subsequent breaches.

Q. What does the Ownership of Materials clause do?

A. The ownership of materials clause declares that materials developed in the course of the services will be the exclusive property of the Customer. The clause further holds that the Computer Services Provider will not be held responsible for damages resulting from the use of the mentioned materials for work other than services contracted for in the agreement.