What is a contract for services?
A contract for services is a legally binding agreement for the supply of services by one business to another.
The service supplier may be an individual working as a self-employed, independent contractor on a freelance basis or they may be a larger business whose employees carry out the work.
Contracts for services are often contrasted with contracts of service. A contract of service sets out terms of employment between an employee and a business, whereas a contract for services maintains an independent business relationship.
A contract for services may also be called a service agreement or a service contract.
Why use a service contract?
A written services contract makes the agreed terms under which the services are supplied difficult to dispute later.
In other words, if there is a issue later (such as in the service supplier being paid on time) it should be much easier and faster to resolve the problem because you can point to what was clearly written in a legally binding contract.
Because precisely what was agreed can be found out by reading the contract, disputes are less likely to occur. Both parties understand their obligations.
What are the key terms that a service agreement should contain?
Key terms of a service contract should include a description of the services that will be provided, price and payment, limitation of liability, confidentiality and ownership of intellectual property (ownership rights to both IP created before the services are supplied and to that created in the course of the provision of the services) and termination of the agreement.
There may also be alternative dispute resolution procedures specified, such as using mediation before litigation. This can be beneficial to smaller businesses that may not be able to afford litigation to resolve problems relating to relatively lower value services.
There may also be other legal requirements that need to be addressed within the contract in order for it to be compliant with the law. For example, you might require that the contract is GDPR compliant - that is that it complies with the requirements under data protection law to set out how personal data is processed by the two parties.
If you are a self-employed contractor, making sure that the relationship does not fall under the IR35 rules is also likely to be important. While the terms of your contract cannot ensre that the relationship is not one of 'disguised employment', a services contract is one good indicator that the relationship is not employment, particularly if it specifically addresses the features of a relationship that tend to indicate independence (such as provision of your own equipment).
What is a service level agreement?
A service level agreement (often abbreviated to SLA) are the terms that define the level of service that the provider will give, such as the quantity or volume of the work, the quality and speed. It may also address what happens if the agreed minimum standards fall.
Service level agreements tend to be used where the level of the service provided can be measured and varied.
A service level agreement may be part of a broader services agreement if the services provided can be succinctly described, or it may form a schedule or addendum to the main agreement, or it may be a completely separate document.
The advantage of breaking out the service level agreement from the main contract is that if the level of service is likely to change more frequently than the general agreement to provide those services, the SLA can be reviewed, and if necessary amended, without affecting the other contract. It may be that the client expects standards to increase over time or it may be that there are discrete pieces of work to be carried out and later ones will only be defined and/or awarded on the completion of earlier ones.
What is a statement of work?
A statement of work is similar to a service level agreement in that it is a statement or schedule separate to the main governing agreement that sets out the specifics of a particular piece of work. It may reference the main contract so that if further work is carried out, instead of having to prepare and agree all contractual terms, the terms of the original contract apply to a specification of new work.
Like a service level agreement, using a statement of work reduces the administrative burden of changing the main umbrella contract for new pieces of work.
The terms under which you work
Service agreements are usually the non-negotiable terms and conditions under which the service provider works. That isn't to say that the customer cannot ask to change them (particularly if there is an SLA or statement of work), but it is the provider that usually drafts the terms and puts them to their client.
By and large in a business to business relationship you are free to set the terms you want.
the rights and obligations of the customer can be defined by the provider, including obligations such as to provide equipment and materials, to have gained any necessary permissions for the work, and to have access to the premises when required
the contractor can insist that additional expenses incurred in carrying out the work are reimbursed by the customer (such as travel expenses to premises), although the customer may want those over a certain amount to be pre-approved and for receipts to be provided
payment terms could be anything, including full or partial payment in advance and a deposit
rights to change the services rate, most likely within limits and with reasonable notice
limitation of liability of the service provider for damage or loss the client's business as a result of the work carried out (where it would be reasonable to do so)
Similar contract templates
If the services you provide are consultancy services, one of our consultancy agreement templates is likely to be more suitable.
If you are providing services through a website or app, you may want to look at our website terms and conditions templates.
All these types of agreements are contracts for services.