Service Agreement Template for UK Businesses
A well-drafted service agreement protects your business and sets clear expectations with clients. This guide covers everything UK businesses need to know.
Last updated: February 2025
What Should a Service Agreement Include?
A service agreement is a contract between a service provider and a client that defines the scope of services, payment terms, and the legal framework for the relationship. For UK businesses, it must comply with the Consumer Rights Act 2015 if dealing with consumers, or be governed by common law for B2B arrangements.
- Scope of services: detailed description of what will be provided and what is excluded
- Payment terms: fees, invoicing schedule, payment deadline, and late payment consequences
- Duration and termination: contract length, renewal terms, and how either party can exit
- Liability and indemnities: caps on liability, exclusions, and indemnification provisions
Liability Clauses and Limitations
Liability clauses determine what each party is responsible for if things go wrong. In B2B contracts, parties have significant freedom to limit liability, but certain exclusions — such as for death or personal injury caused by negligence — cannot be excluded under the Unfair Contract Terms Act 1977.
- Cap aggregate liability to a multiple of fees paid, typically 1x to 3x the annual contract value
- Exclude liability for indirect, consequential, and special losses in B2B contracts
- You cannot exclude liability for death, personal injury from negligence, or fraud
- Consider mutual indemnities for IP infringement and data protection breaches
Governing Law and Dispute Resolution
UK service agreements should specify English and Welsh law (or Scots law if appropriate) as the governing law. Including a dispute resolution clause can save significant time and cost by requiring mediation or arbitration before court proceedings.
- Specify the governing law — England and Wales is standard for most UK business contracts
- Include a tiered dispute resolution clause: negotiation, then mediation, then litigation
- Consider arbitration for high-value contracts or international elements
- Specify the courts that will have jurisdiction if litigation is necessary
Key Takeaways
- A comprehensive service agreement covers scope, payment, liability, and termination at minimum.
- Liability caps and exclusions are largely negotiable in B2B contracts but some exclusions are prohibited by law.
- Always include governing law and dispute resolution clauses to avoid costly jurisdictional arguments.
Frequently Asked Questions
Do I need a different service agreement for each client?
You should have a standard template that covers your general terms, but tailor the scope of services, pricing, and any client-specific requirements for each engagement. Many businesses use a Master Services Agreement (MSA) with project-specific Statements of Work (SOWs) for flexibility.
Can I limit my liability to zero in a B2B service agreement?
You cannot exclude liability for death or personal injury caused by negligence, or for fraud. Beyond that, B2B liability limitations are largely a matter of negotiation. However, a total exclusion of liability may be challenged as unreasonable under the Unfair Contract Terms Act 1977. A reasonable cap is better than an attempted total exclusion.
Should my service agreement include a force majeure clause?
Yes. Since the COVID-19 pandemic, force majeure clauses have become standard in UK commercial contracts. The clause should define qualifying events, the notification process, and the consequences — typically suspension of obligations for a defined period before either party can terminate.
Manage service agreements and track client payments automatically. Try AccountsOS free.
AccountsOS generates legally-structured UK business contracts in 60 seconds. From £10/month.
Get Started FreeThis is guidance for UK businesses, not legal advice. For complex legal matters, consult a qualified solicitor.
Back to commercial agreements