The words that decide who pays.
Service contracts turn on a couple of dozen terms that are rarely defined where you need them. These are the ones worth knowing before you approve an invoice. New to all of this? Start with the basics.
- Parts-only coverage
The vendor supplies the failed component free, but bills you for the labour to fit it.
Under a parts-only plan the contract covers the physical component and nothing else. The technician's time is billed at the contract labour rate, which on a major repair is usually the larger half of the invoice. A $1,250 compressor replacement can arrive as a $0 part and four billable hours. Check the rate schedule as carefully as the parts list.
- Parts and labour coverage
Both the component and the time to fit it are covered by the contract.
The most common mid-tier plan, and the one where incorrect billing shows up most often — a labour line on a covered repair looks entirely routine, so it gets approved without anyone checking the plan. If a repair is covered for parts and labour, the diagnostic time spent finding the fault is usually covered too, not billable separately.
See also parts-only coverage, diagnostic fee
- Covered equipment schedule
The list of specific units, by model and serial number, that the contract applies to.
Contracts cover named machines, not kitchens. The schedule is usually an appendix near the back listing each unit by model and serial. If the serial on the invoice is not on that schedule, the repair may be genuinely uncovered even though an identical unit three feet away is covered. This is worth checking first, because it settles the entire invoice in one step.
See also term
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- Exclusion
A named circumstance where the contract gives coverage back.
Exclusions are typically a numbered list, and a handful account for most declined claims: consumables and wear items, misuse or operator error, lack of documented maintenance, damage from external causes, and refrigerant loss without a located leak. An exclusion only bites if something triggers it, and what triggers it is almost always the technician's service report — which is why obtaining that report matters as much as reading the contract.
See also service report, consumables and wear items
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- Service report
The technician's written account of what failed and why.
The single most consequential document in a coverage dispute, and the one most often missing. It is what turns "compressor failure" into either a covered claim or an excluded one, because exclusions are written in terms of cause. If the vendor has not supplied one, requesting it is a reasonable message on its own and frequently resolves the question before any dispute is needed.
See also exclusion
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- Contract labour rate
The hourly rate the contract fixes for technician time, often varying by time of day.
Most contracts fix separate rates for standard hours, evenings, weekends and holidays. Rate drift — the contract says $125 an hour, the invoice says $145 — is the quietest form of overbilling because the line looks correct in every other respect, and the same $20 recurs on every invoice for the life of the agreement. Before raising it, check the service time: a rate that looks wrong may be the correct after-hours rate.
See also parts-only coverage, callout or trip fee
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- Callout or trip fee
A charge for attending the site, distinct from the labour billed once there.
A contract will often promise a response time — four hours, next business day — without anywhere authorising a fee for meeting it. The promise is an obligation on the vendor, not permission to charge. If a callout fee appears, look for a clause that specifically allows it, and check whether the rate schedule already includes an after-hours rate covering the same thing.
See also response time commitment, contract labour rate
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- Response time commitment
How quickly the vendor undertakes to attend after a fault is reported.
A service level the vendor owes you, commonly four hours for emergencies or next business day for routine calls. It is easily misread as justifying an emergency surcharge; it does the opposite, since the fast response is something you have already paid for in the premium.
See also callout or trip fee
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- Deductible
A fixed amount you pay per incident before coverage applies.
Common on extended warranties and less so on annual maintenance contracts. Worth checking whether the deductible is per incident or per visit — a fault requiring two visits should normally attract one deductible, not two, and being billed twice for a single underlying failure is worth questioning.
See also term
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- Consumables and wear items
Parts expected to be replaced routinely, usually excluded even under full coverage.
Gaskets, filters, light bulbs, door seals and belts. Because they wear out through normal use rather than failing, most contracts exclude them at every coverage level. A gasket billed on an otherwise covered repair is usually correct — knowing that saves an unnecessary dispute.
See also exclusion
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- Diagnostic fee
A charge for determining the cause of a fault, separate from repairing it.
Where a plan covers parts and labour for a failure, the time spent diagnosing that failure is usually part of the covered labour. Billing diagnosis separately and then billing the repair as covered charges you for half of a job the contract already pays for.
See also parts and labour coverage
- Term
The dates between which the contract is in force.
The first thing to check on any invoice, because it settles everything downstream: there is no point arguing about whether a compressor is covered if the service date fell two months after the contract expired. Watch for coverage that runs from installation rather than from purchase, which can differ by months on equipment that sat in a warehouse.
See also covered equipment schedule
More in what to do when a coverage claim is declined, manufacturer warranty or service contract — which one pays?
- Coverage limit
A cap on what the vendor will pay — per incident, per year, or over the life of the contract.
Usually worded as "shall not exceed", "maximum liability" or "aggregate annual limit". Anything above the cap is yours to pay, even when every line on the invoice is otherwise covered. Annual and lifetime caps run down as repairs are paid under them, so a large repair late in the contract year can find less left than the figure printed in the contract. A cap is not the same as an hourly labour ceiling, which limits the rate rather than the total.
See also deductible, authorisation threshold
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- Preventive maintenance requirement
A clause requiring scheduled servicing — cleaning, descaling, filter changes — as a condition of coverage.
Many contracts exclude failures caused by missed maintenance, and some make coverage conditional on maintenance being kept up to date. A missed visit does not automatically void a claim: an exclusion usually needs the missed maintenance to have caused the failure. Keep maintenance records with the contract. They are the evidence that settles the argument either way.
See also exclusion, service report
- After-hours or emergency rate
A higher labour rate for work outside the contract's normal service hours.
Usually a fixed hourly figure or a multiple of the standard rate, such as one and a half times. It applies only when the work genuinely happened outside the hours the contract defines, and some contracts also require you to authorise the emergency call. The technician's arrival time on the service report is what settles whether the premium was earned.
See also contract labour rate, response time commitment
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- Workmanship warranty
The vendor's own guarantee on a repair it carried out, commonly for 30 to 90 days.
If the same fault returns within that period, the return visit — and often the part — should be on the vendor, not on your contract or your budget. It is easy to miss because the second invoice looks like any other. Before approving a repeat repair, check whether the unit was serviced recently for the same problem.
See also manufacturer warranty, service report
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- Manufacturer warranty
The equipment maker's guarantee against defects, which normally responds before any service contract.
Covers defects in materials and workmanship for a fixed period from installation, often with separate terms for parts, labour and the compressor. While a unit is still under manufacturer warranty, a service contract may exclude the repair or expect the warranty to be claimed first. An invoice billed to you for a warranty repair is a charge the manufacturer should have carried.
See also workmanship warranty, parts and labour coverage
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- Time and materials (T&M)
Billing by the hour plus parts at list price, with no contract terms applied.
How work is billed when no service contract covers it. The trouble starts when a covered unit's repair is raised as a time-and-materials job by mistake: the invoice then carries full labour and full parts pricing for work the contract already pays for. A T&M invoice for a unit on your covered equipment schedule is worth a second look.
- Refrigerant allowance
The quantity of refrigerant a contract includes, often stated in pounds per unit per year.
Refrigerant above the allowance is billable, usually by the pound. Because the allowance is often annual, whether a recharge is covered can depend on how much has already been used on that unit this year — which no single invoice shows. Keep a running tally per unit, and check the pounds billed against the unit's nameplate charge.
See also consumables and wear items, coverage limit
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- Parts markup
The percentage a vendor adds to its cost of a part, which many contracts cap.
Written as "cost plus 20%" or "list price less 10%". Where a contract caps the markup, a part billed above the cap is overcharged even though the part itself is legitimately billable. Checking it needs the vendor's cost or the list price, which you are entitled to ask for when the contract sets the formula.
See also contract labour rate, consumables and wear items
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- Travel time
Labour billed for the technician's journey to and from your site.
Distinct from a trip or callout fee, though invoices often carry both. Some contracts include travel, some bill it at the labour rate, and some replace it with a flat zone charge. A trip charge and travel time on the same visit is worth questioning unless the contract authorises both.
See also callout or trip fee, response time commitment
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- Minimum charge
A minimum number of labour hours billed for any visit, whatever the time on site.
Commonly one or two hours. It is legitimate only where the contract states it; otherwise billed labour should match the time recorded on the service report. Where a minimum charge and a separate callout fee both appear on one invoice, check that the contract provides for both.
See also callout or trip fee, service report
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- Automatic renewal
A clause that renews the contract for another term unless you cancel within a notice window.
The window is often 30 to 90 days before the term ends. Miss it and the contract renews on its existing terms, sometimes with a price increase built in. Put the notice date in the diary when you sign: it is the one point where rates, exclusions and the equipment schedule are open to negotiation.
See also term