address review comments

Signed-off-by: Neeharika-Sompalli <neeharika.sompalli@swirldslabs.com>

Author: Neeharika-Sompalli

HIP/hip-1261.md

@@ -374,13 +374,14 @@ value. If not specified, the default value for an `includedCount` is 0.
 
 #### Free and node/network-exempt operations
 
-The `free` field applies to both transactions and queries. If `free` is `true`, the operation has no node, network, or
-service fee; `baseFee` and `extras` are ignored.
+The `free` field applies to both transactions and queries, but only controls the service fee component. If `free` is
+`true`, the service `baseFee` and `extras` are ignored. The node and network fee components still apply unless
+`nodeNetworkFeeExempt` is also `true`.
 
 Some operations are paid through another mechanism or are privileged system operations. A service fee definition can
 set `nodeNetworkFeeExempt` to `true` for these operations. In this case the node and network components are not charged,
-but the configured service component still applies. If both `free` and `nodeNetworkFeeExempt` are `true`, `free` takes
-precedence and the entire operation is free.
+but the configured service component still applies. An operation is entirely free only when both `free` and
+`nodeNetworkFeeExempt` are `true`.
 
 
 ### Unreadable Transactions
@@ -397,12 +398,13 @@ network owners to determine the appropriate price.
 
 ### Queries
 
-The configuration for a query includes the `free` boolean field to indicate whether the query is free. If true, then no
-fees are paid at all. If false, then the *node*, *network*, and *service* fees are defined as with transactions to
-compute the cost of the query. A compliant implementation will create a `CryptoTransfer` transaction to submit to the
-network to pay for the required fees. The `node` and `network` components are not listed in the transfer list, but they
-are included in the `transactionFee` since they will be paid by the payer. The `service` fee will be included in a
-transfer list to pay the node for whatever work was required for this query.
+The configuration for a query includes the `free` boolean field to indicate whether its service fee is waived. If true,
+the service `baseFee` and `extras` are ignored, but node and network fees still apply unless `nodeNetworkFeeExempt` is
+also true. Otherwise, the *node*, *network*, and *service* fees are defined as with transactions to compute the cost of
+the query. A compliant implementation will create a `CryptoTransfer` transaction to submit to the network to pay for
+the required fees. The `node` and `network` components are not listed in the transfer list, but they are included in the
+`transactionFee` since they will be paid by the payer. The `service` fee will be included in a transfer list to pay the
+node for whatever work was required for this query.
 
 ```json
 {
@@ -456,11 +458,12 @@ The validation process checks the following, in any order:
    within a single list of extras.
 8. **Service Definitions**: Each service in the `services` list must have a non-empty `schedule` list (at least one
    transaction or query defined).
-9. **Free Queries and Transactions**: If a transaction or query sets `free` to true, its `baseFee` and `extras` are
-   ignored during fee calculation, but they must still comply with all other validation rules if present (e.g., valid
-   types, non-negative values, valid references).
-10. **Node and Network Fee Exemption**: If `nodeNetworkFeeExempt` is true, only the service fee is charged. If `free` is
-    also true, `free` takes precedence.
+9. **Free Queries and Transactions**: If a transaction or query sets `free` to true, its service `baseFee` and `extras`
+   are ignored, but node and network fees still apply. Any ignored fields must still comply with all other validation
+   rules if present (e.g., valid types, non-negative values, valid references).
+10. **Node and Network Fee Exemption**: If `nodeNetworkFeeExempt` is true, only the service fee is charged. The entire
+    operation is free only when both `free` and `nodeNetworkFeeExempt` are true.
+
 ### Schema
 
 The schema is defined in Protobuf. The wire format is JSON.
@@ -646,12 +649,15 @@ message ServiceFeeDefinition {
    */
   repeated ExtraFeeReference extras = 3;
   /**
-   * If true, then `base_fee` and `extras` are ignored, and the transaction or query
-   * will be free.
+   * If true, then the service `base_fee` and `extras` are ignored. Node and network
+   * fees still apply unless `node_network_fee_exempt` is also true.
    */
   bool free = 4;
 
-  /** If true, omit node and network components but continue to charge the service component. */
+  /**
+   * If true, omit node and network components but continue to charge the service component.
+   * If `free` is also true, the entire operation is free.
+   */
   bool node_network_fee_exempt = 6;
 }