Internal contract
An internal contract is one that exists between a principal and an agent, i.e. the agent is legally appointed to act on its behalf. An external contract is one that exists between a principal and a third party, usually with the facilitation of an agent.
A service level agreement (SLA) is a common type of internal contract, which sets out what a supplier/service provider is required to provide to the client, and to what standard.
For more information, see Service level agreement.
Internal contracts can be prepared within an organisation, i.e. between teams or departments, or used for the outsourcing of services, such as facilities management, IT services, and so on.
Some of the elements typically required in an internal contract include:
- Name of the principal/client.
- Name of the agent/supplier.
- The product and/or services to be provided.
- Start date.
- Estimate of the elapsed time required. (For SLAs, this takes the form of a renewal date.)
- Price and the terms of payment.
- Client’s accountabilities, i.e. what the client must do/provide in order for the supplier to successfully perform the contract.
- Risks and assumptions about external dependencies that may hinder the performance of the contract.
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