Service Agreement vs Terms of Business
Last updated: February 2025
Quick Comparison
| Aspect | Service Agreement | Terms of Business |
|---|---|---|
| Customisation | Bespoke to each engagement | Standardised across all clients |
| Negotiation | Both parties negotiate terms | Usually presented as non-negotiable |
| Incorporation | Signed by both parties | Incorporated by reference; may not be separately signed |
| Cost to prepare | Higher; legal fees per engagement | Lower; one-time drafting cost |
| Suitability | Complex, high-value projects | Volume, repeatable services |
What Is a Service Agreement?
A bespoke contract negotiated between parties that sets out the specific terms for delivering defined services.
Key Features
- • Individually negotiated for each engagement
- • Detailed scope of work, deliverables, and timelines
- • Tailored liability, indemnity, and termination provisions
- • Both parties typically sign the document
Best For
- • High-value or complex engagements
- • Projects requiring tailored terms
- • Relationships with significant risk exposure
What Is a Terms of Business?
Standard pre-drafted terms that apply to all clients or engagements, typically presented on a take-it-or-leave-it basis.
Key Features
- • One set of terms applied across all clients
- • Incorporated by reference into proposals or invoices
- • Efficient for high-volume, repeatable services
- • Usually drafted to favour the issuing party
Best For
- • Standardised or repeatable services
- • High client volume with similar engagements
- • Lower-value work where bespoke negotiation is impractical
When to Use a Service Agreement
Use a service agreement for significant engagements where the scope is complex, the stakes are high, or the client reasonably expects negotiated terms. Common for consultancy, IT projects, and professional services.
When to Use a Terms of Business
Use terms of business when you deliver a standardised service to many clients on similar terms. Typical for agencies, SaaS providers, and recurring service businesses where individual negotiation is impractical.
Which Does Your Business Need?
Most UK small businesses benefit from having solid terms of business as their baseline, with the option to use a bespoke service agreement for larger or more complex clients. Ensure your terms of business are properly incorporated into each engagement.
FAQ
How do I properly incorporate terms of business under English law?
You must give the other party reasonable notice of the terms before or at the time of contracting. Include a clear reference in your proposal, order form, or invoice, and make the full terms easily accessible. The battle of the forms rules apply if both parties have competing standard terms.
Can I use both a service agreement and terms of business?
Yes. Many businesses use a short engagement letter or order form that references their standard terms of business, adding bespoke terms where needed. Ensure the documents clearly state which prevails in case of conflict.
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Get Started FreeThis is guidance for UK businesses, not legal advice. Consult a solicitor for complex matters.
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