For any B2B provider in the UK, the Service Agreement is the bedrock of the commercial relationship. It is more than just a formality; it is a tool for risk management, cash flow protection, and relationship clarity. At Gloaming Legal, we frequently see disputes that could have been avoided with better drafting. Here are five non-negotiable clauses for your agreements.
Scope of Services
Ambiguity is the enemy of a successful project. Vaguely defined "deliverables" lead to scope creep, where you find yourself performing extra work without extra pay. Every agreement must clearly specify what is included—and just as importantly, what is not included. Reference a detailed Schedule or Statement of Work (SOW) to maintain precision.
Payment Terms & Late Fees
Protecting your cash flow is paramount. Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses have a statutory right to claim interest and compensation for debt recovery costs. Your contract should explicitly state payment milestones, VAT requirements, and the consequences of late payment to deter arrears.
Pro-Tip: Termination
Always include a 'Termination for Convenience' clause if you want the flexibility to exit a multi-year deal without proving a breach of contract.
Termination Clauses
A good agreement defines the exit as clearly as the entry. You need robust provisions for termination due to material breach, insolvency, or simply giving a set notice period. Define exactly what happens upon termination: are intellectual property rights handed over immediately? Is there a final reconciliation of fees?
Limitation of Liability
Without this, your entire business is at stake for a single mistake. UK law (including the Unfair Contract Terms Act 1977) requires these limits to be 'reasonable'. We recommend capping liability at a percentage of the contract value or a fixed amount covered by your professional indemnity insurance.
Dispute Resolution
Court proceedings are expensive and public. A well-drafted clause mandates a tiered approach: first, good-faith negotiation between senior executives; second, professional mediation. Only if these fail should the parties resort to the courts of England and Wales.
Ensure Your Contracts Are Vigilant
Don't let a generic template put your business at risk. Our expert solicitors provide tailored drafting and review services for UK businesses.