Last Updated February 15, 2024
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What is a Service Agreement?
A Service Agreement is a contract that defines the terms of a business relationship between two parties (i.e., a service provider and a client).
The purpose of creating a formal document is to clearly set expectations for each party during the relationship. This way, you’ll both benefit from reduced chances of a dispute.
LawDepot’s Service Agreement template works great for establishing general services provided between businesses and individuals. However, we also offer templates for specific services such as:
The advantages of creating a Service Agreement
- Reduce conflict with clearly established terms and conditions
- Have evidence for when you enforce contract terms
- Maintain a high level of professionalism
Is a Service Agreement the same as an Employment Contract?
No, employees and self-employed contractors are different types of workers. The service provider in a Service Agreement is a self-employed contractor and is not entitled to the same legal protections as employees. So, the terms of a Service Agreement vary widely from that of an Employment Contract. For example,
- Contractors have more freedom over their working hours compared with employees.
- Contractors generally use their own tools and equipment, while employers provide these to employees.
- Contractors direct themselves, while employees are directed by their employers.
However, it’s crucial to understand that a worker’s rights may depend on the situation. For instance, if a contractor can prove they have worker status, they may be able to make other claims (e.g., paid time off).
If you’re unsure about a worker’s employment status, consider talking to a solicitor for advice on your situation.
How to write a Service Agreement
Customise LawDepot’s Service Agreement template to suit your unique situation. Simply fill in the form to generate your contract, then make any final changes with the document editor. Then, download your document as a PDF or print a copy for your records.
Our template includes all the main clauses needed for a typical Service Agreement. The information you’ll need to draft your agreement is as follows:
First, specify how long services are needed (e.g., for a single job, a fixed term, or indefinitely) and where the work will be done (as this affects the laws that apply to your contract).
2. Party details
Provide the contractor and client’s name and address. You can also specify whether each party is an individual or a business entity.
3. Service details
Next, clearly describe the service details (i.e., provide a scope of work).
Remember: it’s crucial to be clear and specific when describing the tasks required. If possible, include important dates, project milestones, and a list of deliverables.
With LawDepot’s Service Agreement, you can add each service detail as a separate paragraph and they all appear as a bullet point list in the document.
4. Payment
State whether the contractor bills a flat fee, an hourly rate, or some other method of payment. If needed, you can also specify whether that fee includes value-added tax (VAT).
Describe when the contractor should be paid (e.g., when services are complete or at certain stages of completion).
To help guarantee the contractor gets fairly paid, they may require a deposit or charge late payment fees. Typically, a reasonable deposit amount is worth about 10-50% of the total contract amount. Reasonable late fees are often up to 25% per year on unpaid sums.
5. Terms and conditions
Customise these common service contract terms to suit your situation:
- Ending the contract early
- Addressing work-related expenses
- Assigning ownership of intellectual property
- Requiring a duty of confidentiality
6. Final details
Does your situation require a clause that we haven’t already addressed in the template? No problem. We give you the option to write your own clause and provide tips on how to phrase it.
Then, preview the document to see how your answers fit into the document and read through the other boilerplate clauses included in the template. If needed, you can use the document editor to delete or change items as needed.
Is a Service Agreement legally binding?
Yes, in most cases a Service Agreement is a legally binding contract.
Keep in mind that there are legal elements that all contracts must contain in order to be binding:
- Offer and acceptance: The service provider offers to work in exchange for compensation, and the client accepts the price for the level of service.
- Consideration: Each party exchanges something of value. In this case, the service provider gets paid while the client benefits from the services.
- Intention: The parties mutually agree to enter into a binding contract. This element is also known as a “meeting of the minds”.
- Legality: All elements of the contract must abide by the law. For instance, the client cannot hire the contractor for illegal services (e.g., laundering money).
- Capacity: Each party must have the legal capacity to enter the contract.