Most Service Agreements are quite one-sided when it comes to termination. The Client generally wants a good deal of flexibility in how they can terminate the agreement. The Agency of course wants things locked in.
While some one-sidedness is acceptable, there are a few things you’ll want to watch out for.
The term of a Service Agreement is the duration during which its terms apply. Remember that if your agreement does not contain an express term, then its provisions apply to any SOWs that you sign with the Client, whenever those are signed. If an agreement has a stated term, it only applies to SOWs signed within that term. If an agreement has a specific term, keep the following in mind:
Generally, I prefer agreements without a stated term. I think this better sets the stage for negotiation of terms on an SOW by SOW basis.
Bigger than the issue of term is termination. These paragraphs describe when the Agency or the Client can exit a relationship. There are three categories of termination provision you’ll see: termination for convenience, termination following bankruptcy, and termination for breach.
Client prepared Service Agreements often contain a clause allowing the Client to terminate at any time. A typical clause reads like this:
<aside> 📑 Client may terminate this Agreement or any SOW at any time and for any or no reason upon 10 days prior written notice to Agency.
Keep the following in mind when facing a clause like this:
<aside> 📑 Agency may continue work during the termination notice period as necessary to facilitate an orderly wind-down of the applicable project and Client shall pay Agency for the fees incurred by Agency during such period.
Notwithstanding any contract language, once termination is on the table, an Agency’s ability to collect on outstanding invoices and additional work is in jeopardy. Agency’s focus should be on minimizing additional receivables and collecting existing receivables.