Service with a Smile – The Pitfalls of Service Contracts

In business, keeping costs under control might be the difference between profit and loss.

After salaries and tax, service contracts account for a significant percentage of outgoings. These include photocopying service agreements, franking and other office machines, and even maintenance of restroom facilities.

There are several common problems which arise, almost always from terms contained in the “small print” which is rarely read and considered.

The first is duration. The time for which the contract runs is a fixed term. Be sure that the duration in the contract is as agreed and not longer than the business needs. Then the termination procedure should be checked.

Often there are precise notice requirements governing the length of notice to be given to terminate and how that is to be given.  Note these at the start, and review in advance of the date when you want to terminate . If you fail to do this, you may be fixed with a substantial further period before the contract can be ended.

Regularly review charges to ensure they are up to date. Failure to do this will lead to a backlog of charges and receipt of a one-off invoice which is disproportionately high. Alternatively, this also gives an unscrupulous supplier the opportunity to “roll forward” the historical charges into a new, more expensive contract.

Observe the obligations which both parties take on. Failures by the supplier should be noted to them in writing, and failures by you could lead to penalty charges being levied.

There are many pitfalls, and so beware if you are entering into a service agreement. If you have any concerns about an existing contract, please contact Tim Lawrence at Thursfields on tlawrence@thursfields.co.uk or call 01905 730450 for constructive and friendly advice. If you have a dispute which has arisen, then it is even more important that you contact us. We can help.