7 essential service contract template clauses (and when to use them)
A service contract is a written agreement that sets out the scope of services that will be provided to a customer, and the legal terms that govern the supply of services. To get the full benefit of a service contract, it is crucial to include some key clauses that protect both the customer and the supplier.
What is a service contract?
A service contract is the key legal document for the supply of services to customers. It is a contract between the service provider (or supplier) and the customer receiving and paying for the service. It can be used for any type of service, from creative design to event planning to IT support.
Having a service contract in place is crucial to protect both the supplier of services and its customer. Without one, exactly what each party is expecting from the relationship could be unclear and lead to a dispute in the future.
What should be included in a service contract?
Comprehensive service contracts contain a range of different commercial terms and legal provisions. We have set out below some of the key clauses that should be included in a service contract template, and why they matter:
Scope of services - it is really important to set out exactly what services are being provided (and any out-of-scope services) in a service contract. This is beneficial to both the customer and the supplier - having a clearly defined service scope in the contract reduces the risk of any future misunderstandings about what each party is expecting the services to entail (and therefore reduces the risk of a dispute in the future).
Service standards - the service contract should simply and clearly set out what is expected of the supplier when they are providing the service. For example, it is common to provide certain types of services so as to meet defined service levels or KPIs (e.g. software support services). If the customer wants those service levels to be absolute targets that the supplier should achieve, they should be set out in a service contract.
Customer responsibilities - as well as the supplier having performance obligations, there will be certain things that the customer will need to do in order to receive the services e.g. providing the supplier with access to staff, data or other information. Particularly where these are critical for the supplier to be able to perform the service, these responsibilities should be set out in a service contract so that the customer is contractually obliged to meet its obligations.
Payment terms - as a supplier, receiving revenue for the service is one of the most important aspects of a business. Robust payment provisions should be included in the service contract to protect that revenue stream. Failure to make payment in accordance with those payment terms will be a breach of contract by the customer that could lead to the supplier making a claim, bringing the contract to an end early or suspending the services. Likewise, for customers, clear payment terms are key to ensure that no hidden payments are due and there can be no dispute over exactly what payments have been agreed.
Supplier’s liability - limitation of liability clauses set out financial caps and exclusions on a supplier’s liability, in the event that there is a valid claim under the contract by a customer. Including such a clause will ensure that the supplier knows what its potential financial exposure is in the event that a claim is made against it under the service contract. Without such a clause, the supplier’s potential financial exposure will be uncapped and unlimited, which increases the supplier’s risk profile in providing the services.
Warranties and disclaimers - a warranty is a promise in a contract that, if breached, may give rise to a claim for damages by the other party. Some warranties will automatically be implied in a service contract under English law (e.g. that the services will be carried out with reasonable care and skill). However, some customers may request other specific warranties to be included in the agreement so that they can be sure that the services will be performed to the standard they expect (e.g. that the supplier has all rights and consents necessary to perform the services). This is particularly important where the services being purchased are business-critical (e.g. payment processing software services).
Renewal and termination rights - both parties should be clear on how long the service contract lasts and how it can be brought to an end early. As a customer, you should know whether you are agreeing to renew the contract automatically and, if so, make sure you have diarised accordingly so you don’t miss renewal dates and get accidentally locked into contracts.
What types of service contracts are there and when to use them?
There are a number of different types of service contracts for different scenarios - find out which one suits your situation below:
B2B - where services are provided to business customers, it is in the interest of both parties to document that relationship using a service contract template. No matter what the services are, having a clear contract in place removes any potential ambiguity and reduces the risk of disputes in the future. Our Services Agreement template can be found here.
B2C - where services are being provided to consumers, consumer protection laws require that a contract is written in a certain way and specific terms are included. For example, the contract should be easy to understand, fair and reasonable and include the statutory 14-day cooling-off period. Docue’s Services Agreement template includes an option for it to be used with consumer customers, with the consumer protection law contract requirements satisfied.
Online sales - where the sale of services is being concluded online (e.g. via the supplier’s website), it is common for a set of terms and conditions for the supply of services to be used rather than a standalone contract that both parties physically sign. For example, customers are often asked to agree to the terms and conditions by ticking a box at the checkout stage. Docue's template Online T&Cs for the Supply of Services can be used for online sales.
Software services - sometimes services are supplied alongside the licensing of software. For example, these services might include software support, installation or maintenance services. As the services are connected with the supply of the software, it is important that the service contract also includes licensing provisions for the software use and restrictions on use by the customer. Depending on how the software is made available to customers, one of the following service contract templates should be used:
Software Licence Agreement - where the customer is running the software from its own network or systems; or
Software as a Service (SaaS) Agreement - where the software is accessed from the supplier’s systems (or via a cloud-based platform).
Multiple services or projects - sometimes, a supplier may be engaged by a customer to provide a range of different services over time. For example, an IT supplier may provide consultancy services, software support services and hardware maintenance and be asked to provide each of these services at different points in time. Where this happens, a framework agreement should be entered into that allows the customer to engage the supplier on multiple occasions and for multiple services. This can be done by entering into a Master Services Agreement that sets out the overall legal relationship between the parties. Each time the customer wants to engage the supplier, the parties will then agree a Statement of Work that sets out the specific detail of the services or project required (e.g. the service scope, the cost and any service levels that apply).
Goods and services - if goods are being sold to a customer alongside the provision of services, a Supply of Goods and Services Agreement should be used. This contains clauses relating to both the supply of goods and the supply of services, and contains terms for both B2B and B2C relationships.
How do I write a contract for services?
The best service contracts contain a balance of commercial and legal terms:
Commercial terms - exactly what services are being provided and the price payable for those services.
Legal terms - protections for each party in relation to the supply and receipt of the service.
The service contract should be prepared and signed before the supplier starts to provide the services to the customer.
Can I write my own services contract?
Yes! With Docue, you can easily write your own service contract using one of the templates above. Lawyer-drafted guidance notes will guide you through the process, so you know which clauses to pick for different scenarios (e.g. if you want pro-supplier terms or pro-customer terms). Simply click through the intelligent tick box options and text box answers and you’ll have a comprehensive, tailored, and ready-to-use services contract in no time.
Want to try Docue for Free? Signup Now!
Tags: service contract, services contract, service contract template, terms of service, services contract template, supply of services contract
Docue Legal Team