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What is a Service Agreement?
A Service Agreement is a legal contract between two parties where one party agrees to provide services to the other in exchange for payment. It clearly defines the terms and conditions of the services being offered, such as the scope of work, timelines, payment terms, and responsibilities of both parties.
In India, businesses and individuals rely on Service Agreements to formalize their professional relationships. A well-drafted service agreement ensures transparency, protects legal interests, and minimizes disputes. Whether you’re a freelancer, a startup, or a large corporation, having a legally enforceable service contract is essential for smooth operations.
What should be included in a service agreement?
A service agreement should include:
- Description of services to be provided
- Payment structure and schedule
- Timelines and delivery milestones
- Confidentiality and non-disclosure clauses
- Intellectual property ownership
- Termination conditions
- Dispute resolution procedure
- Liability, indemnity, and legal responsibilities
Why is a service agreement important?
This agreement holds the service provider accountable and protects you from hidden charges, delays, or poor-quality work. If the provider misses deadlines or fails to meet standards, you can use the contract to claim damages or terminate the relationship legally. Without it, you're relying on trust alone leaving you exposed if something goes wrong.
Benefits of Service Agreement
- Defines Responsibilities Clearly: It ensures that each party is aware of their roles and responsibilities, avoiding any misunderstandings.
- Protects Legal Rights: In the event of any dispute or disagreement, it serves as legal proof or evidence.
- Specifies Payment Terms: To prevent payment disputes, it specifies the time and amount that the service provider will be paid.
- Ensures Confidentiality: If the service involves sensitive information, the agreement protects it from being disclosed.
- Provides Legal Recourse: In case of breach of law or any violation, the affected party can take legal action.
Who needs a service agreement?
- Anyone hiring or offering services in fields like digital marketing, development, consulting, maintenance, or professional support.
- Business owners looking to clarify roles and expectations with service providers.
- Startup founders who need clear terms with external professionals.
- Independent contractors offering services to clients.
- Companies or individuals looking to protect both time and money in professional engagements.
When should you use a service agreement?
- Before any work begins between the client and service provider.
- Prior to making any payment, advance or otherwise.
- Before delegating tasks or sharing confidential information.
- When there’s a risk of disputes due to unclear scope or timelines.
- As soon as both parties agree to move forward with the project.
- To avoid misunderstandings, incomplete work, or accountability issues.
Types of Service Agreement
1. Consultancy Agreement
A contract in which a consultant charges a customer a certain amount in exchange for expert services or advice. It defines the scope, duration, and payment terms for consulting work.
2. Building Services Vendor Agreement
An agreement between a vendor and a client for providing building-related services, such as maintenance or repairs. It outlines service expectations, schedules, and payment terms.
3. Construction Service Agreement
A contract outlining the terms for construction services, including scope, timelines, and payment. It ensures clarity on project deliverables, responsibilities, and legal compliance.
4. Fixed-Cost Agreement
A contract where the service provider agrees to complete the work for a pre-agreed fixed price, regardless of actual expenses. This protects clients from unexpected cost overruns.
5. General Contracting Servicing Agreement
A contract in which a general contractor is engaged to supervise and control construction or reconstruction services. It defines the contractor’s responsibilities, project milestones, and payment structure.
6. Agency Agreement
A contract where one party (agent) is authorized to act on behalf of another (principal) in business dealings. It sets terms for authority, compensation, and obligations of the agent.
7. Standard Service Agreement
A basic contract defining the terms and conditions under which services will be provided. It typically includes service scope, payment terms, and termination clauses.
8. SAAS Agreement
A contract between a SaaS provider and a client, specifying terms of software access, usage, and licensing. It also includes provisions on data security, uptime guarantees, and support services.
9. Website Development Agreement
A contract between a client and a developer for creating, designing, or maintaining a website. It covers project scope, deliverables, timelines, and intellectual property rights.
10. Home Service Agreement
A contract between a homeowner and a service provider for household services, such as repairs, maintenance, or cleaning. It specifies service frequency, pricing, and liability terms.
11. Master Service Agreement
A contract that sets the general terms and conditions for future services between two parties. It streamlines the contracting process for multiple projects or transactions.
12. White Label Agreement
A contract in which one business supplies goods or services that another business resells under a different name. It covers branding, quality control, and payment terms.
13. Marketing Service Agreement
A contract that specifies the requirements, deliverables, and terms of payment for marketing services between a company and a marketing agency. It ensures clear expectations on campaigns, performance metrics, and timelines.
14. Staff Augmentation Agreement
A contract where a company hires external professionals or teams to temporarily supplement its workforce. It defines roles, compensation, and the duration of engagement.
15. Vendor Agreement
A contract between a business and a vendor specifying the terms for supplying goods or services. It includes pricing, delivery schedules, and dispute resolution terms.
16. Independent Contractor Agreement
A contract where a freelancer or contractor provides services to a client while remaining self-employed. It clarifies payment, work expectations, and non-employee status.
17. Software IT Service Agreement
A contract outlining the terms for providing IT services, such as software development, support, or maintenance. It includes details on service levels, data security, and warranties.
Which parties are involved in the Service Agreement
A Service Agreement involves two key parties: the Service Provider and the Client (Service Receiver).
1. The Service Provider (freelancer, contractor, agency, or company) This party is responsible for delivering the agreed-upon services while meeting quality standards, deadlines, and contractual terms. Their scope of work includes performing tasks, providing updates, and ensuring compliance with the agreement.
2. The Client (Service Receiver)
This party ensure Service Provider and is responsible for defining requirements, making payments, and providing necessary approvals or resources. Their scope of work includes ensuring clear communication and timely payments as per the agreement.
The relationship is contractual, with obligations, deliverables, payment terms, and dispute resolution mechanisms outlined to ensure smooth collaboration.
Key Clauses of the Service Agreement
1. Parties Involved
Includes the names, roles and contact information of the client and service provider.
2. Scope of Services and derivable
A detailed description of the services being provided, exceptions, deliverables, timelines etc.
3. Confidential information
It defines what constitutes confidential data, how it should be handled, and restrictions on disclosure to third parties to protect sensitive business information. Categories of Confidential Information includes:
- Business & Financial Data
- Client & Customer Information
- Technical & Product Data
- Employee & HR Records
- Legal & Contractual Documents
4. Terms of Payment
Specifies the payment amount, method (e.g., bank transfer, online payment, etc.), due dates, invoicing process, and any late payment penalties.
5. Non- Solicit Clause
Prevents either party from directly or indirectly soliciting the employees, clients, or business partners of the other party for a specific period after the contract ends.
6. Non- Compete Clause
Restricts the Service Provider from engaging in similar work or business that competes with the Client within a defined time frame and geographical location.
7. Duration and Termination
The agreement’s validity period and conditions for ending it.
8. Responsibility and Indemnity
Defines responsibility for damages or losses and protects against legal claims.
9. Dispute Resolution
Outlines how conflicts will be resolved (e.g., mediation, arbitration, or court).
Important Indian Laws Related to Service Agreements
In India, the validity of Service Agreement is governed by the Indian Contract Act, 1872 (Sections 10, 14, 23, and 27). Service Agreement must be lawful and voluntary. Reasonable restrictions on trade to protect confidentiality are allowed under Section 27.
Consequences of Breach
GST Implications
Governing Laws
If any party breaks the Service Agreement by not providing the services, another party can take action under the Indian Contract Act, 1872. Consequences may include:
- Legal Action - The aggrieved party can approach the court to enforce the agreement and recover losses caused by the breach.
- Compensation - The defaulting vendor may be held liable to pay monetary damages for any financial or business loss suffered by the client.
- Termination of Agreement - The non-breaching party can choose to terminate the contract immediately without further obligations.
- Impact on Professional Reputation - A breach can harm the vendor’s credibility in the industry, affecting future projects, client trust, and long-term business prospects.
As per the Goods and Services Tax (GST) Act, 2017, services rendered under the agreement are subject to GST. The service provider must charge and remit GST at the applicable rate. Both parties should clarify whether the prices mentioned are inclusive or exclusive of GST.
Under the Arbitration and Conciliation Act, 1996, disputes can be resolved through arbitration, offering faster, confidential, and fair resolution. Section 7 mandates arbitration if included in the Service Agreement, while Section 8 allows courts to refer disputes to arbitration
An arbitration clause in your agreement ensures benefits like:
- Faster Resolutions: Avoids lengthy legal battles.
- Scope of Services: The description of services provided by the parties.
- Confidential Proceedings: Keeps sensitive business information private.
- Fair Dispute Resolution: A neutral arbitrator decides the case.
Common mistakes to avoid for Service Provider and Client
Service Provider (Vendor/Contractor)
Client (Service Recipient)
Dos:
- Clearly define the scope of services to be provided in the agreement.
- Communicate any issues or delays to the client promptly.
- Deliver the services according to the agreed timeline and quality standards.
- Maintain confidentiality of client information.
- Ensure proper documentation and reporting as required by the contract.
- Follow industry standards and legal regulations applicable to the service.
Don'ts:
- Don’t perform services outside the scope of the agreement without client consent.
- Avoid making vague or unclear promises about service deliverables.
- Don’t delay work or miss deadlines without prior communication and agreement.
- Don’t disclose any confidential or proprietary information without authorization.
- Don’t provide substandard or incomplete services.
Dos:
- Clearly outline the expectations, scope, and deliverables in the agreement.
- Provide necessary access and resources to the service provider.
- Communicate any changes in requirements or expectations promptly.
- Pay the service provider on time as per the agreed payment terms.
- Review the work regularly and provide constructive feedback.
Don'ts:
- Don’t make significant changes to the project scope without agreement and compensation.
- Avoid withholding necessary information or resources needed for the provider to perform.
- Don’t delay payments or fail to meet agreed-upon terms.
- Don’t request services outside the scope of the agreement unless renegotiated.
Why Choose DigiLawyer unilateral Service Agreement Template?
DigiLawyer drafts legally verified Agreements to protect sensitive business information during collaborations, partnerships, or negotiations. Our templates cover key aspects like services provided, duration, and breach consequences, ensuring both parties are equally bound.
We ensure compliance with the Indian Contract Act, 1872, and the Arbitration and Conciliation Act, 1996, providing a solid legal foundation. Whether you need a standard template or customized clauses for non-compete or non-solicitation, we’ve got you covered.
Full Customization - Tailor clauses to fit your specific business needs.
Cost-Effective - Affordable pricing for startups, SMEs, and enterprises.
Legally Verified - Compliant with Indian Contract Act & Arbitration Laws.
Instant Download - Get your Service Agreement ready within minutes.
Time-Saving - No need to draft from scratch; use our ready-to-go templates.
Revision Support - Assistance with revisions to match evolving business needs.
Lifetime Access - Download it once and use it anytime.
FAQs Related to Service Agreement
The following actions can be taken in order to enforce a service agreement:
- Examine the Agreement: Make sure the provisions, obligations, and penalties for violations are mentioned in detail.
- Send a Legal Notice: Send a legal notice requesting compliance or payment if the other party breaches the agreement.
- File a Lawsuit: If the violation continues, you may go to court to ask for remedies like injunctions, damages, or specific performance.
- Arbitration or Mediation: Before going to court, you can start arbitration or mediation if the agreement contains a dispute resolution clause.
Yes, a Service Agreement is legally binding if it meets the following conditions:
- Offer and Acceptance: Both parties must willingly agree to the terms.
- Lawful Consideration: The agreement should involve a valid exchange of value (e.g., payment for services).
- Competent Parties: Both parties must be of legal age and sound mind.
- Legal Purpose: The contract must be for a lawful activity.
- Proper Execution: It should be signed by both parties, and stamp duty should be paid (if applicable).
While it is not mandatory to hire a lawyer, it is highly recommended. A lawyer can:
- Ensure the agreement is legally valid and covers all essential clauses.
- Protect your legal rights by identifying potential loopholes.
- Include specific legal remedies and dispute resolution mechanisms.
- Help you comply with applicable laws such as the Indian Contract Act, 1872, and GST regulations.
- Offer legal advice on custom clauses and industry-specific requirements.
A Service Agreement is a specific type of Contract that outlines the terms for providing services, including scope, payment, and responsibilities. While all Service Agreements are Contracts, not all Contracts are Service Agreements. A Contract is a broader legal term covering various agreements, while a Service Agreement focuses only on service-related transactions.
If the other party violates the Service Agreement, follow these steps:
- Review the Agreement Check the contract for breach clauses and dispute resolution terms.
- Notify the other party in writing about the violation and seek a resolution.
- Try to resolve the issue through discussion or mediation.
- If unresolved, send a formal notice demanding compliance.
- If the agreement includes a dispute resolution clause, follow the specified process.
- As a last resort, pursue legal action in court for damages or enforcement.
No, arbitration is not mandatory in a Service Agreement unless the contract includes an arbitration clause. If both parties have agreed to arbitration as the dispute resolution method in the agreement, they must follow it.
You can use the same Service Agreement for international clients, but it's not always advisable. To ensure enforceability and compliance, consider:
- Governing Law- Specify which country’s laws will apply in case of disputes.
- Currency & Payment Terms- Clarify currency and payment methods.
- Intellectual Property Rights- Address IP ownership and usage across borders.
- Data Protection & Privacy- Comply with international data laws like GDPR.
- Dispute Resolution- Define arbitration, mediation, or court jurisdiction.
Yes, a single Service Agreement can cover multiple projects, but it should be structured properly. To ensure clarity and flexibility, you can:
- Use a Master Service Agreement.
- Clearly Define Scope & Deliverables.
- Include Amendment/Modification Clauses.
- Set Payment Terms Per Project.
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