- 1 What is a Service Agreement?
- 2 Contract Clauses in Service Agreements
- 2.1 Content of services to be provided
- 2.2 Inspection
- 2.3 Compensation
- 2.4 Relationship (not a labor contract)
- 2.5 No Subcontractor
- 3 General Clauses
What is a Service Agreement?
A Service Agreement is a contract that provides for the payment of remuneration in exchange for services rendered. In Japan, it is often translated as a business consignment agreement or a service agreement, but it may also be called, for example, a contractor agreement, a consultant agreement, a development consignment agreement, or a brokerage agreement, depending on the nature of the work to be consigned. A service agreement can be an umbrella term for these various types of agreements. Recently, electronic commerce related agreements for the provision of services such as production and management of websites for Japan and delivery within Japan have been increasing. The payment of remuneration can also take various forms, including fixed fees, commission-based pay, and revenue sharing (profit sharing).
We offer a wide range of services, including drafting, legal review, and translation of English service contracts upon request. We not only prepare standard English service contracts, but also draft contracts that are tailored to the nature of the transaction and the client’s request.
In principle, we prepare a quotation in advance of the client’s request to our firm, and prepare a engagement agreement according to the contents of the quotation that is agreed upon. This ensures that the attorney’s fees are clear, so you can rest assured that your request will be handled with the utmost care.
The types of English service contracts that we prepare include, for example, the following types:
Software development contract
Independent business transaction agreement
M&A brokerage agreement
Electronic Commerce outsourcing agreement
Contract Clauses in Service Agreements
The terms and conditions of a service agreement will vary depending on the services to be provided. However, they all have the same characteristics in terms of providing services and making payment for the services. Therefore, we would like to look at the typical clauses in a service agreement.
Content of services to be provided
The service agreement should specify the services to be provided. The services to be provided are also referred to as the Scope of Works (SOW). If the services to be provided have not been finalized at the time the contract is drawn up, the description should be something like “The services to be provided are as described in Exhibit A.” When the details are finalized, the contents of the Exhibit will be supplemented and revised in turn. The advantage of stating “as described in the attached sheet” is that it allows for a variety of services.
Example 1 (Format in which the services to be provided are as described in Exhibit A)
During the term of this Agreement, Service Provider shall render the services stated in Attachment A. The Service Provider shall perform its obligation with duty of care of a good manner.
Example 2 (M&A intermediary company conducts a search for the target company)
The Company requests A Corporation to provide the Company its consulting service with regard to finding a target as a partner of the Company and A Corporation agrees to provide the Company with such service.
Example 3 (When advertising activities are carried out on behalf of the company)
During the term of this Agreement, the Company shall render the following services to Client in order to promote the sales of the products.
1 Select appropriate media;
2 Make press release;
3 Provide advices for public relation.
When the Service Provider has completed the Service, Service Provider shall notify the Client of such completion. The Client shall, within ten business days of the receipt of the Completion Notice, complete inspection as to whether the Services are made in compliance with the Agreement. The Client shall, when it reasonably finds that the Service Provider completed the performance of the service pursuant to this Agreement, make notice to the Service Provider that the Client accepts the Service as duly performed pursuant to the Agreement. The Services shall be deemed to be completed upon the issuance of the notice hereunder.
The question of what payment should be made for services rendered is an important issue at the heart of a service contract. The determination of compensation depends on the type of agreement reached between the parties. In order to avoid disputes at a later date, it is necessary to clearly stipulate not only the amount of compensation but also the method of payment, such as lump-sum payment, installment payment, advance payment, deferred payment, or payment with conditions.
Example 1 (Example of general statement regarding compensation)
As consideration for the Services hereunder, the Client shall pay Service Provider the sum of JPY 1,100,000 including consumption tax, and all other costs and expenses relating to the performance of the Services.
Example 2 (Example of statement regarding Contingency Fee)
“Contingency” means that a certain condition is met, and the reward is generated only when a contract is concluded or other results are achieved. In the case of a contingency contract, no compensation is paid unless results are achieved.
In the event that Client enters into an agreement with the Target as a result of Company’s service hereunder, Client shall pay 20% of the annual contract money (hereinafter referred to as the “Contingent Fee”).
Example 3 (When agreeing to pay an advance payment)
Client shall pay $10,000 (hereinafter referred to as the “Advance Payment”) to Company within one month after the effective date based on the invoice issued by Company. The Advance Payment covers following items:
1 Necessary fees for preparing the legal documents;
2 Travel expenses and accommodation
Relationship (not a labor contract)
The Service Provider will provide the Service to the Client as an independent contractor and not as an employee.
The Service Provider shall not have any third party perform or conduct any part or all of the Service, or allow any third party to do so, without prior written consent by the Client.
The General Clauses are also important in the English Service Agreement. The content of the general terms basically does not differ greatly from other contracts, such as sales contracts. However, there are some special provisions such as non-competition obligations, confidentiality clauses, restrictions on governing law regarding labor contracts, anti-company clauses, and clauses on bribery.
The party hereof shall keep strictly confidence and shall not disclose technical information or any other confidential information received from the other party (the “Disclosing Party”) to any third party without the prior written consent of the Disclosing Party except to the specified person or entity who need to know the same for the manufacture and sale of Products. The party receiving technical information or any other confidential information (the “Receiving Party”) shall use the same only for the purpose of manufacturing and selling Products under this Agreement, and shall not use the same for any other purpose. This article shall not apply to the followings:
(a) Information which at the time of disclosure is in the public domain;
(b) Information which, after disclosure, becomes part of the public domain, by publication or otherwise other than through unauthorized disclosures by the Receiving Party;
(c) Information which at the time of disclosure is already in the Receiving Party’s possession as shown by its written records;
(d) Information which is made available to the Receiving Party by an independent third party who does not owe any confidential obligation;
(e) Information which is requested to be disclosed by a court order.
This Agreement shall commence on the Effective Date and shall continue to and through 30th day of September 2021, unless renewed by further agreement in writing between the Parties.
When outsourcing certain services to be performed outside of a country, there is a possibility that the trustee may offer bribes to national or local officials of that country. If such bribes are offered in Japan, they are subject to imprisonment and fines under the Penal Code (crimes related to bribery) and the Unfair Competition Prevention Law. When done outside of Japan, it is also punishable under the criminal law of the country in question (bribery can result in the death penalty or life imprisonment). Bribery is not only prohibited when done by oneself, but client will be also punished in the same manner as the contractor when committed by the contractor of the service (FCPA in the U.S. and the Bribery Act in the U.K.). It is beneficial to have a clause prohibiting bribery in cases where the nature of the services may lead to the possibility of offering a bribe.
Either of the Parties hereto shall not, and shall cause its employee, agents, consultants or subcontractors or their employees, agents or consultants not to (a) use any funds for unlawful contributions, gifts or entertainment or for other unlawful expenses or (b) make any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns, whether or not such contributions, gifts, or entertainment, expenses or payments are facilitation payments.
Exclusion of Anti-Social Forces
Recently, service contracts have increasingly included clauses prohibiting gangs. In international transactions, it is possible that a contractor may use gangs or gangsters in the course of performing certain tasks. Even if the entrusted company uses a gang, the requesting company itself may become an anti-social force, which may cause significant obstacles to subsequent business activities. It is recommended to include an anti- social force clause as much as possible to make it clear that the company will not have any relationship with gangs.
Each party hereto represents and warrants and covenants to the other party that;
(a) It is not and will not be an organized crime group or a member, a quasi-member or an affiliate of an organized crime group (collectively “Anti-Social Forces”);
(b) Its management or business is not and will not be involved with any Anti-Social Forces;
(c) It does not and will not use any Anti-Social Forces;
(d) It is not and will not be involved with any Anti-Social Forces by providing funds or convenience to them or by any other means;
(e) It does not and will not have any inappropriate relationship with Anti-Social Forces.
Either party hereto may terminate, without any prior notice or demand, this Agreement by notifying in writing to the other party if (i) any of representations and warranties made by the other party under this Article is found to be untrue or incorrect, or (ii) the other party breaches any of covenants under this Article.
Neither party shall be liable to the other for any delay or failure in the performance of its obligations under this Agreement if and to the extent such delay or failure in performance arises from any cause or causes beyond the reasonable control of the party affected (“Force Majeure”), including without limitation, act of God, acts of government or governmental authorities, compliance with law, regulations or orders, fire, storm, flood or earthquake, war, rebellion, revolution, acts of terrorism or riots, epidemics, strike or lockouts.
Neither party may assign any of its rights or obligations under this Agreement to any third party without the prior written consent of the other party.
If the service contract is regarded as a contractor contract, the governing law may be selected by agreement of the parties. On the other hand, if the service contract has the nature of a labor contract, the labor laws and regulations of the place where the labor is provided may be compulsorily applied to the portion related to the provision of labor, and the choice of governing law by agreement may be excluded. Whether the contract is a contractor contract or a labor contract will be determined based on the existence or non-existence of a command and order relationship and the independence of the contractor with respect to the performance of the work.
This Agreement shall be governed by and construed in accordance with the laws of Japan.
All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this Agreement shall be finally settled by arbitration in Tokyo, Japan in accordance with the Commercial Arbitration Rules of the Japan Commercial Arbitration Association. The award shall be final and binding upon both parties.
This Agreement may be executed simultaneously in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall be deemed to be one and the same agreement. In the event that this Agreement is executed in both the English and Japanese language, the English text shall govern in the event of any discrepancies.
This Agreement may not be amended except by an instrument in writing signed on behalf of all of Parties herein.
No waiver of any term of conditions of this Agreement shall be deemed to be a further or continuing waiver of that terms or conditions or a waiver of any other terms or conditions.
All notices and other communications shall be in writing and shall be given by registered airmail, international courier or by facsimile, or by other means providing proof of delivery to the parties at their respective office first above referred to or to any other address of which a party notifies the other in accordance with this Article.
This Agreement constitutes the entire and completer agreement between the parties concerning the subject matter of this Agreement and supersedes all prior agreements.