What Is a Contract for Services?
A contract for services is a contract used between a company or individual providing a service and a client. These contracts are typically related to labor. You can use a contract for services for a specific, one-time job or for an ongoing position that does not have an end date at the time you sign the contract. Generally speaking, the latter example of a contract for service is an at-will arrangement, so there is no set end date, and either party can terminate the agreement. A typical written contract for services will define:
- A description of the work and the scope of the work
- How much this job will cost
- When payments will be made
- How disputes should be handled
- Other assurances
Depending on the type of contract for services, a client may make payment:
- At the start of the service
- During the service
- At the completion of the service
When Would You Use a Contract for Services?
You may use a contract for services for a variety of types of jobs, gigs, and services, including:
- Animal services, such as dog walking, pet sitting, or pet care
- Childcare work, such as babysitters, daycare providers, or nannies
- Creative work, such as freelance writers, editors, or graphic designers
- Construction work, such as construction, carpentry, or electrical installation
- Consulting positions
- Delivery drivers
- Events services, such as catering, bartending, or DJ
- Healthcare work, such as home healthcare, physician services, or personal trainers
- HVAC services
- Lawn care services
- Legal services
- Maintenance work, such as interior design, janitorial, or housekeeping services
- Manufacturing or transportation work, such as production, shipping, or storage
- Office work, such as human resources, financial services, or administrative services
- Snow removal services
- Technology work, such as technical writing or web development
A contract for services can be used for either personal or professional purposes. For instance, you can use a contract for services to define a work agreement between a homeowner and a contractor or a small business and a freelance writer or photographer.
Why Should You Put a Contract for Services in Writing?
While some verbal agreements are enforceable, your best bet is to have a contract for services put in writing if the terms of your agreement are complex or you need to explain terms in detail. For example, a customer visiting a hair salon for a haircut would technically involve a verbal contract (the hairdresser is agreeing to cut your hair, and you are agreeing to pay them, but you wouldn't usually sign a written contract before your haircut). You might use a written contract, on the other hand, as a small business owner working with a freelance web designer, as that agreement will be more complex.
By creating a written contract, you have the opportunity to outline expectations for all parties to the agreement. Your contract for services will help you avoid misunderstandings or disagreements that could arise if you do not make the terms of your agreement clear.
What Happens if a Contract for Services Is Broken?
If either you or the other party cannot fulfill the agreement, your first step should be to discuss the situation amicably. You may have the option to just alter or amend the original contract.
If it is not possible to amend the original contract, you will then want to review that contract to see what options are outlined for terminating the agreement. You can sometimes get out of a contract without legal consequences if parties to the contract have agreed upon how a contract can be terminated.
However, cases may arise when the contract can neither be amended nor terminated. If this happens and you cannot agree with the other party about how to solve the issue, you would need to think about going to mediation or even small claims court to find a resolution.
What Should a Contract for Services Include?
Most contracts of this kind will include similar agreements and terms. Examples of common components of a contract for services include:
- Contact information: You should identify the service provider and customer, including contact information for all parties to the agreement.
- Description of services: Describe both the service and scope of the work provided. You should include a clear and accurate description of exactly what the service provider will do for the duration of your agreement. The more detailed you make this description, the less chance you'll have of later misunderstandings arising. For instance, a description of a contract for someone to install an internet modem in your home or office would state that the contractor must provide the modem and install it, run Ethernet cables through your property, and handle quality assurance to ensure the unit properly works.
Terms of payment:
Outline the payment schedule. State the compensation details of the arrangement, including information for:
- Pay rate
- Payment schedule
- Tax rate
- Who is responsible for work-related expenses, for example, travel or specific materials
- Any penalties for nonperformance or late payment
- Confidentiality agreements: Though not required, some contracts for services include terms detailing confidentiality. You may include this type of clause to protect sensitive information, either about your business or about yourself. Here is further reading about nondisclosure agreements.
- Noncompetition and/or nonsolicitation clauses: You can also choose whether you wish to include noncompetition and/or nonsolicitation clauses in a contract for services. These clauses may be used to prevent a service provider from unfairly competing or soliciting and typically covers a specified time period.
- Ownership of materials: You should use a contract for services to specify which party retains ownership rights to any materials produced during the contract. Some agreements state that the service provider retains rights to the work produced, while others grant rights exclusively to the customer. It depends on the specific program and contract.
- Information about dispute resolution: Explain how disputes can be resolved under the contract.
Some contracts also include additional information. These clauses are typically optional and will depend on your personal situation. Examples include:
- Legal expenses
- Return of property
- Any relevant insurance and/or compliance requirements
Contract for Services vs. Contract for Goods
A contract for services is similar but distinct from a contract for goods. Similarities between the two types of contracts include:
- Setting standards of performance
- Having force majeure provisions, which are allowances for what is often referred to as "acts of God" that could delay or completely prevent the contract's competition without the service provider being at fault
- Placing legal obligations on the contracting parties
- Requiring consideration ( here is further information about consideration)
However, key differences exist that you must be aware of when choosing the correct type of contract, including:
- Contracts for goods include the delivery of tangible items, while contracts for services include the performance of tasks.
- Contracts for goods may necessitate the negotiation of a shipping contract with a third party as well so that goods can be transported to the contracting party.
- Different laws govern the two kinds of contracts.
If you are not sure whether you should use a contract for goods or a contract for services, you should seek legal counsel to ensure you are using the proper contract for your situation. In general, working with an experienced lawyer can help you create a contract for services that fits your needs.