A service agreement is a contract where one party agrees to perform services for another. It's broader than a consulting agreement — it covers any service, from marketing to maintenance to professional services.
When you need one
Any time money changes hands for services rather than goods, a written agreement protects both sides. Without one:
- The scope is undefined, leading to disputes about what was "included."
- Payment terms are unclear, leading to late or disputed invoices.
- Liability is uncertain, leaving both parties exposed.
Core terms
- Scope of services — detailed enough to prevent scope creep, flexible enough for reasonable changes.
- Fee structure — fixed price, hourly, retainer, or milestone-based. Include payment schedule and late fees.
- Term — start date, end date, or ongoing with termination notice.
- Service level — quality standards, response times, or deliverable specifications.
Protecting both sides
- Indemnification — each party covers their own negligence, not the other's.
- Limitation of liability — cap damages at the total contract value (standard for service agreements).
- Insurance — require the service provider to carry general liability and professional liability (E&O) coverage.
- Confidentiality — both sides protect each other's business information.
Termination
- For convenience — 30 days' notice is standard.
- For cause — immediate termination for breach, non-payment, or insolvency.
- Wind-down — what happens to work in progress, data, and outstanding payments.
Always include a "survival" clause — confidentiality, indemnification, and IP ownership should survive the termination of the agreement.
Make it legal
- Both parties sign.
- Exchange signed copies.
- Keep a copy with the project file.
A state-specific service agreement drafted to your terms takes about ten minutes.