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What needs to be in an IT service agreement?

October 27, 2020   Brigid NelmesPhilip Evangelou

Your service agreement is a contract with your customers that details the terms and conditions of your business. A comprehensive IT service agreement will outline your role and responsibilities while providing protections to limit your liability in the case of a dispute. 

Key elements of an IT service agreement

Scope of services: This section essentially covers the who, what, where, when and how of your service. It provides terms of service including what services you are providing and how they will be carried out.  This includes a clear timeline/schedule for the provision of services and how particular delays are handled. As part of the schedule, you may opt to provide progress updates on the service to your customer. You may include a ‘Standard of Services’ clause and/or an ‘Acceptance Testing Clause’ (requires you to provide test results to ensure compliance with the specifications), both of which can provide customers with confidence in your business.  

Payment: The clue is in the name! This part details how and when payment occurs. Clear payment provisions provide certainty and back you up in the case of nonpayment. Different payment options include an upfront payment, payment on completion, progress payments. You should consider ongoing maintenance costs if necessary and whether delays impact the cost. 

Intellectual property: Are you creating new applications, software, hardware or other products for your customers? For this section, you should consider: who owns the products developed as part of the service provided to the customer, whether you need a licence to use any of the customer’s existing software/data, whether you need a licence to use any products produced after the service, continuing ownership of the parties over any existing intellectual property before the services were engaged. 

Client responsibilities: It is likely that your ability to provide the services may depend on the customer providing certain material and data. This section outlines the customer’s responsibilities so that you can complete your work and ensures that you are not liable for any delays resulting from the customer’s failure to fulfil their obligations.

Confidentiality: If the customer is providing you with access to their business and data, a confidentiality clause gives them confidence in your commitment to confidentially handle this information. 

Liability: This section places limits on your liability in particular circumstances. For example, your liability for delays and the circumstances limiting that liability, your liability for third-party products or services that impact your service. 

Dispute resolution: A pre-determined alternative dispute resolution process, such as mediation, saves time and money and is more likely to ensure the business relationship survives the dispute. 

Termination: This section outlines the circumstances where you or the customer have the right to terminate the agreement.


A comprehensive IT services agreement is fundamental to ensuring an understanding between the parties about what services you are providing (and what you’re not providing), the service quality and payment method. Your IT services agreement is key to maintaining a strong business relationship by ensuring issues can be clearly resolved and disputes dealt with in a timely and cost-efficient manner. 

If you need assistance drafting or reviewing your IT services agreement, get in contact with us on 1300 337 997.

About Brigid Nelmes

Brigid NelmesBrigid is a legal intern at OpenLegal, working with our legal content team. She is currently completing her Bachelor of Laws and Bachelor of Arts (International Studies) at the University of Technology Sydney. Her interests are in digital/privacy and startup law.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.