Service agreements are at the root of many business relationships in the UK since they set the terms of cooperation between providers and clients. Service agreements set out all of the expectations for the relationship and are a legal way to ensure that all parties follow through on their obligations.

We'll explore what service agreements are, why they matter, and how to craft ones that work. We'll also break down the essential terms you need to include to make your agreements effective and comprehensive

💡It’s worth noting that, usually, the provider of the services is the one to provide the draft service agreement. With that said, either party can draft the agreement, as there are no legal restrictions dictating who can create it.

What Is a Service Agreement?

A service agreement is a contract between two parties: the service provider and the client. This document outlines the specific services to be provided under the agreement, the terms of payment, and the roles and responsibilities of all the parties involved.

Example: Service Agreement between a Small business and a Digital Marketing Agency

if a small business needs to improve its online presence, it would enter into a service agreement with a digital marketing agency.

Service agreement will detail the scope of services that the agency will provide, such as search engine optimisation, content creation, and social media management. It will also specify payment terms, perhaps with a portion paid upfront and the rest upon completion of certain milestones, and include how either party can modify or terminate the agreement if circumstances change.

When Should You Use a Service Agreement?

Whether you're a business owner or an individual hiring someone for a service—be it a graphic designer, cleaner, or plumber—a service agreement provides clarity and prevents misunderstandings.

For businesses offering services like consulting, IT support, or maintenance, a service agreement is crucial. It safeguards your interests by clearly outlining payment terms, responsibilities, and liability limits.

Freelancers and contractors also benefit from using service agreements. These documents formalize their relationships with clients, ensuring they get paid on time and minimizing the risk of "scope creep" (the unplanned expansion of project requirements).

In long-term or recurring arrangements, such as monthly IT support or weekly cleaning services, a written agreement is essential. It can specify important details like cancellation policies, payment schedules, and other key terms.

When two businesses collaborate—for example, on marketing or outsourcing projects—a service agreement helps avoid miscommunication and fosters trust.

What to Include to a Service Agreement?

Whether you're creating one for the first time or refining an existing contract, knowing what to include is essential.

From defining the scope of work and setting clear payment terms to outlining confidentiality clauses and dispute resolution mechanisms, we’ll guide you through each detail to ensure your agreement is both comprehensive and enforceable.

• Scope of Services: This section outlines exactly what the service provider will do. For example, if a company hires a web developer, this would list tasks like website design and coding that the developer will provide under the agreement.
• Payment Terms: This includes how much needs to be paid, when payments should be made, and how. It also covers what happens if a payment is late.
• Duration: Specifies when the work starts and ends. If the work is ongoing, this part also covers how to renew or end the agreement.
• Performance Standards: Describes the quality and timelines expected from the service provider.
• Confidentiality: If either party needs to share sensitive information, this clause ensures it stays protected.
• Dispute Resolution: This provision explains how any disagreements about the agreement itself, or work, will be resolved, including steps like mediation or arbitration and where these would take place.
• Termination Conditions: Lists the reasons either party might end the agreement early, such as missed deadlines or breach of terms.

Instructions to Create a Service Agreement

Although it’s always best to consult a legal advisor for a watertight service agreement, it’s also possible to draft one yourself - especially if the amounts in question are not large, or if the services being provided under the agreement are not essential.

The best way to start is by finding a service agreement template. Be sure to check that the template is drafted in accordance with UK law before downloading it, as different jurisdictions have different rules. Creating an agreement that was drafted with, for example, US laws in mind, will not be properly effective in the UK.

Once you’re satisfied that the template applies UK law, tailor it to fit your specific situation, including the services, terms, and conditions of your agreement. Adjust sections like the scope of services, payment terms, and performance standards to accurately reflect the details of the deal.

Even if you draft the agreement yourself, having a lawyer review it is a smart step. A lawyer can clarify complex legal terms, ensure compliance with all requirements, and advise you on any potential issues before they arise. It’s worth keeping in mind that laws and business needs change, so it’s a good idea to review and update the service agreement periodically.

Service Agreement – Free Template

⚠️ This template is provided as a general example of a service agreement. It is essential to ensure it aligns with your specific needs and circumstances. We strongly recommend seeking advice from a qualified legal professional before using it.

Service Agreement

This Service Agreement (the "Agreement") is made on [Date] by and between:

1. Parties

• Service Provider: [Name and Address], registered in England and Wales under company number [Company Number] (if applicable).
• Client: [Name and Address].

2. Scope of Services
The Service Provider agrees to provide the following services (the "Services"):
[Describe the services in detail, including deliverables and timelines].

3. Term of Agreement
This Agreement will commence on [Start Date] and will continue until [End Date/Completion of Services/Terminated as outlined below].

4. Payment Terms
The Client agrees to pay the Service Provider as follows:

• Total Amount: [Specify Amount, e.g., £X,XXX].
• Payment Schedule: [E.g., 50% upfront, 50% upon completion].
• Payment Method: [Bank Transfer, PayPal, etc.].
• Late Payments: Payments not made within [e.g., 30 days] of the due date will incur interest at the statutory rate of 8% above the Bank of England base rate, in accordance with the Late Payment of Commercial Debts (Interest) Act 1998.

5. Responsibilities

• Service Provider Responsibilities:
  [Outline specific responsibilities].
• Client Responsibilities:
  [Outline specific responsibilities, e.g., timely provision of information, access to facilities, etc.].

6. Confidentiality
Both parties agree to maintain the confidentiality of any proprietary or sensitive information shared during the term of this Agreement, as per the UK Data Protection Act 2018 and GDPR (General Data Protection Regulation).

7. Intellectual Property
All intellectual property created during the provision of the Services will:
[Specify ownership, e.g., remain the property of the Service Provider unless otherwise agreed].

8. Liability
The Service Provider’s liability for any claim arising from this Agreement is limited to [Specify Amount, e.g., the total fees paid under this Agreement], except in cases of negligence causing death or personal injury, or other liabilities that cannot be excluded under UK law.

9. Dispute Resolution
In the event of a dispute, both parties agree to first attempt resolution through negotiation. If unresolved, disputes will be referred to mediation in accordance with the Centre for Effective Dispute Resolution (CEDR) rules. If mediation fails, disputes will be subject to the exclusive jurisdiction of the courts of England and Wales.

10. Termination
Either party may terminate this Agreement by providing [e.g., 30 days] written notice. Immediate termination is allowed if there is a material breach of contract.

11. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of England and Wales.

12. Entire Agreement
This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements or understandings. Amendments to this Agreement must be made in writing and signed by both parties.

Signatures

Service Provider:
Name: _______________________________
Signature: ___________________________
Date: _______________________________

Client:
Name: _______________________________
Signature: ___________________________
Date: _______________________________