August 12, 2020

What's next | Service agreements

Wrapping up our 'What's next?' series, in this article we look into 'Service agreements'.

Service relationships underpin a large chunk of the economy – from large scale outsourcing arrangements to professional advisors, construction and engineering to “Software as a Service”. These relationships – and the assumptions that underpin them – are being tested by the coronavirus pandemic: a one in one-hundred-year event that very few could truly say they had planned for.

The instinctive reaction when pulling the contract out of the drawer (or when negotiating new deals) in these circumstances is to look for the get-out clause. It’s a fair bet that more has been written about force majeure clauses in the last few months than the previous decade before that.

While it’s paramount for commercial parties to protect their positions and act in their own best interests, there are often ways to do this which don’t involve a zero-sum game. “We’re all in this together” has been the refrain from the government during this crisis and should – up to a point – work for commercial relationships just as much as social ones.

Sometimes “getting out” will be the only way. But often, looking afresh at the way engagements work and negotiating a new solution will be a better and more sustainable approach for both parties.

With that in mind, here is a brief look at some of the standard practices and assumptions lying behind services relationships, and how these might be addressed in the world of COVID-19.

From service levels to loss here are some assumptions to consider for service agreements.

* Previous article: 'New ways of working'.  

Summing Up

There will be many more standard practices and assumptions underpinning service relationships across the economy. The challenge for commercial partners in today’s world is to test some of these assumptions – and the boilerplate contractual language that often accompanies them – and work towards win/win solutions.

Identifying, considering and negotiating these areas will help service providers and their customers to retain and ultimately grow their commercial relationships. Remembering that we’re all in this together is a worthwhile mantra in these uncertain commercial times.

Social media image credit: Charles Deluvio

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