What is a Service Agreement?
A Service Agreement is a binding contract that defines the terms of a business relationship between a service provider and a client. This document clearly sets out the expectations and obligations of each party and is often referred to as a service contract.
LawDepot’s Service Agreement template is available to make a valid contract in England, Scotland, Wales, and Northern Ireland.
Service Agreements vs. Employment Contracts
Service Agreements describe the terms of a contract between a self-employed service provider and a client, while Employment Contracts describe the contractual relationship between an employer and an employee. Self-employed contractors don’t work under the same conditions as employees. For example, contractors typically:
- Set their own working hours
- Use their own tools and equipment
- Work according to their own methods
- Are not put under a client’s payroll
While employees typically:
- Have their working hours set by their employer
- Have their tools and equipment provided by their employer
- Work at the direction of their employer
- Are on their employer’s payroll, and the employer withholds their income tax
If you’re unsure about a worker’s employment status, consider talking to a solicitor for advice on your situation.
Key elements of a Service Agreement
Key components of a Service Agreement include:
- The scope of services: A clear and specific description of the work being performed.
- Payment terms: Outline of the fees, billing, and VAT charges, if applicable.
- Duration and termination terms: A timeline of how long the agreement will last (e.g., ongoing, until the work is complete, or end on a specific date) and any conditions for ending it.
- Intellectual property rights: Determining the ownership of any deliverables.
- Confidentiality: Terms to protect sensitive information.
- Liability and indemnification terms: Define risk allocation and protection from loss or damages.
- The governing law that applies to the contract.
Using LawDepot’s service contract template, you can make an agreement that includes all the key elements to make a valid contract for your jurisdiction.
Benefits of using a Service Agreement
There are benefits to using a Service Agreement for both parties, including:
- Reducing conflict by clearly establishing the terms and conditions of the working relationship (e.g., payment terms and confidentiality requirements).
- Providing clarity on the scope of the services and work the contractor needs to provide (e.g., deliverables and deadlines).
- Creating evidence if either party needs to enforce the terms of the contract.
- Developing risk management with liability, confidentiality, and indemnification terms.
Overall, service contracts are essential when outsourcing services to contractors as they protect both parties and show professionalism in the business relationship.
Duration of Service Agreements in the UK
The length of the term of a service contract can vary depending on the services being provided to the client. This includes:
- Fixed-term agreements with clear start and end dates. These are especially useful when a contractor is working on projects with their client that have specific deadlines.
- Ongoing agreements that have no specific end date. These are helpful for clients who need ongoing support for their business, like IT or maintenance.
- Task-based agreements that terminate upon completion of a specific project. This type of contract can be helpful when the precise timeline for completion is unclear at the beginning of the contract.
When should I use a Service Agreement?
You should use a Service Agreement when services are being provided by either a freelancer or another business in exchange for payment. Examples of situations where you can use an agreement include:
- You’re providing a service for a client to have a clear agreement to protect your business.
- You’re hiring a service provider to have a clear timeline and scope of the work you require them to do.
- You need to establish ongoing, long-term services that need a more complex framework for deliverables and may need amendments.
LawDepot’s template is great for establishing the general services that businesses or freelancers provide. Additionally, we also offer templates for specific services such as:
How to write a Service Agreement
Customise LawDepot’s Service Agreement template to suit your unique situation. Simply complete the following steps of our questionnaire once you determine how long the services will be needed:
- Choose the location and name the parties of the agreement: Set the governing law for your document and give the full names of each party, whether they’re individuals or companies.
- Determine the services: Provide clear, specific details about the services being provided (e.g., tasks to be performed, milestones, and deliverables).
- Add the payment terms: Include all key payment details, such as billing, deposits, invoicing, and contractual interest, if applicable.
- Include the terms and conditions: Add required notice to terminate the agreement, expenses, intellectual property rights, and confidentiality, if applicable.
- Add any final details: Include additional clauses specific to your business relationship, and add signing details such as the signing date and whether a witness will be present.