What is a Service Contract? 7 Popular Standard Contract Templates

A service contract is a type of contract frequently used by businesses when outsourcing or collaborating on service provision, but not everyone understands what to include or what to be aware of. This article will help you understand everything from the concept and basic content to how to draft a more standard service contract.

1. What is a service contract?

A service contract is a legal agreement signed between two or more parties, in which one party (the service provider) commits to providing one or more types of services to the other party (the service user). The service user is responsible for paying a fee or remuneration to the service provider according to the agreed-upon terms.

2. Object and Subjects of a Service Contract

The object of a service contract is work that can be performed and does not violate the law or social ethics.

The subjects of a service contract are both the service provider and the service user.

3. When You Need to Draft a Service Contract

Whenever you plan to provide services to a client, you should ask them to sign a service contract. This can help protect your own interests and ensure you receive the payment you deserve. This document can help you and your client adhere to the terms and conditions you have discussed.

Similarly, if you plan to hire services for your business, you should also ask the service provider to sign this type of contract. This ensures they understand the scope of their work, the timeline for completion, and how you plan to pay them.

4. What Does a Service Contract Include?

Most of these contracts will include similar terms and agreements. For example, a typical construction contract might include:

• Contact information for both parties
• Description of services and scope of work
• Compliance and insurance requirements
• Payment terms
• Confidentiality agreement
• Indemnification
• Warranty
• Default clauses
• Remedies and dispute resolution

5. Common Types of Service Contracts

• Construction service contracts (repair, transportation; interior design; etc.)
• Insurance service contracts
• Asset rental and lease service contracts
• Quarantine service contracts
• Scientific and technical service contracts
• Consulting and design service contracts

6. Legal Characteristics of a Service Contract

A service contract is a compensatory contract: The service hirer must pay the service provider once the provider has completed the work and delivered the results as agreed.

It is a bilateral contract: The service provider must perform legal acts as requested by the service hirer, and the service hirer is obligated to accept the work results and pay the service provider.

Reference: Top 9 Compelling Sales Letters to Boost Sales in Any Field

7. Standard Service Contract Template

We will provide readers with some standard contract templates used in the market, such as:

A basic service contract will typically have a structure like the template we have provided. Readers can follow and reference the structure of a sample contract like the one we have provided below when creating one for themselves or their business.

Learn more: Tips for an Intelligent and Effective Contract Management Process 

8. Guide to Drafting a Service Contract for Businesses

8.1. Process for Drafting a Contract for an Individual/Organization

Step 1: Research the service provider

Whether you are the service provider or you are contracting with a contractor, it is essential to research the other party to ensure you can trust them. When hiring a contractor, look up their entity to determine the business’s information and transparency. Some information you can look for includes: Resumes, portfolios, LinkedIn profiles, or social media profiles, etc.

When working with another business, see if they have a good reputation. Check their website and any reviews or their Better Business Bureau entry. All this information can help you anticipate what it will be like to work with them.

Step 2: Discuss the services to be provided

You may need to negotiate compensation and the terms of the agreement to find a compromise that both parties can agree on. Do some research to find out what other service providers are charging for similar work. By setting your price, you can feel more confident when negotiating. After reaching an agreement, you can begin drafting the written service contract.

Step 3: Write the Contract

In your contract, include the services, payment, timeline, and any other important terms you have agreed upon. Additionally, seek a professional to verify the terms in the contract and determine its legality.

Step 4: Sign the drafted contract

After both parties have had a chance to read the contract carefully, both need to sign and date it. Ensure that you both have a copy of it for reference throughout your arrangement.

8.2. What are some additional clauses you can add to the contract?

Along with the general terms and conditions, you can add additional clauses to your contract based on your own interests:

• Non-solicitation clause: This clause prevents the service provider from soliciting or hiring their client’s employees.
• Non-compete clause: Helps prevent the service provider from using inside information to compete in the industry or market where their client operates.
• Confidentiality clause: This clause prevents the service provider from sharing any sensitive, private, or proprietary information about their client.

8.3. Tips for drafting the most effective contract

Avoid unclear terms or jargon

Make your service agreement as simple as possible. Clearly define the terms, deadlines, and other conditions. Do not use vague words, such as “good faith,” “best efforts,” or “reasonable.” These types of words are quite subjective and require explanation.

Agree on termination rights

While discussing the terms of your contract, remember to talk about the circumstances for termination. For example, if the service provider fails to meet a deadline, the other party may terminate the contract.

Keep information confidential

Outline sensitive information that should not be shared by the other party. Similarly, when obtaining signatures, use secure software for electronic signatures. This also applies when you store your service agreement.

Get everything in writing

Although some verbal agreements are upheld in court, it is best to have everything agreed upon in writing. If the two parties agree on an amendment to the contract, be sure to write it down and have it signed.

Learn more: Top 10 best digital signature software today

9. Rights and obligations of the parties signing the contract 

The 2015 Civil Code and the 2005 Commercial Law regulate the rights and obligations of the signing parties: 

9.1 What happens if one party breaches the contract?

If one party cannot fulfill their obligations, discuss the issue professionally first. You might decide to amend your agreement to maintain a good relationship with them. 

For example: If your freelance graphic designer cannot complete the logo design on time, you can agree to an extension for them. Always ensure to discuss payment in these situations, so everyone feels they are being served and compensated fairly.

If you both decide you want to break the contract, be sure to read the terms of the agreement carefully. You may find that if both parties agree, no legal action is necessary. If you both cannot agree on any changes to the contract, you may need to resolve it through mediation or a small claims court.

9.2 Is it necessary to pay Social Insurance?

Yes. Because individuals/businesses participating in this type of contract are subject to compulsory social insurance. You can refer to Clause 1, Article 2 of the 2014 Law on Social Insurance.

9.3 How long is the term of this type of contract?

Vietnamese law does not have specific regulations on the term of the contract. Therefore, the contract term will be based on the agreement of the two representative parties signing the contract. 

10. Common Mistakes When Drafting a Service Contract

When drafting or using a service contract template, many businesses often make seemingly small mistakes that lead to significant legal and financial consequences. An unclear scope of work, lack of binding clauses, or overlooking confidentiality can all lead to disputes, loss of reputation, and unnecessary damages. Below are the most common mistakes to avoid when creating a service contract.

10.1. Not clearly defining the scope of services

One of the most common mistakes is describing the work too vaguely, for example, only stating “provide marketing services” or “perform HR consulting” without specifying the content, items, deliverables, implementation time, and outcomes (deliverables).
The lack of detailed description can lead to different understandings of the scope of responsibility between the two parties, making acceptance, payment, or dispute resolution difficult.

How to fix:

• List each service item in detail.

• Clearly state the completion standards, deadline, and handover format.

• You can attach a Scope of Work (SOW) appendix to ensure clarity.

10.2. Lack of clauses for handling delays by one party

Service contracts often span multiple phases. If there are no provisions for liability, penalties, or the right to suspend the contract in case of delays, the affected party is likely to suffer financial losses, miss business opportunities, or experience supply chain disruptions.

How to fix:

• Clearly state milestones, acceptance procedures, and penalties for delays (as a percentage of the contract value).

• Add a clause allowing for contract extension in cases of force majeure to avoid disputes.

10.3. No confidentiality clause

In the context of digital transformation, most services involve customer data, trade secrets, or intellectual property. The lack of an NDA (Non-Disclosure Agreement) clause puts businesses at risk of leaking important information, causing serious damage to their brand or customers.

How to fix:

• Add a confidentiality clause that clearly specifies: the scope of confidential information, the duration of confidentiality, and penalties for breaches.

• If the service involves technology, you should add a Data Protection Clause in accordance with GDPR standards or the Cybersecurity Law.

10.4. Overlooking the “contract termination clause”

Many contracts focus only on the signing part and forget the legal way to terminate the contract. When disputes arise, the absence of this provision makes termination ambiguous, easily leading to breaches of obligation or claims for compensation.

How to fix:

• Clearly state the conditions and procedures for contract termination, for example: 15 days’ prior notice, completion of remaining obligations, or compensation for incurred costs.

• Add a “termination for breach” section to give the business the right to stop the contract if the partner fails to comply with commitments.

11. Create Online Contracts – Sign Digitally Right on the 1Office Platform

Built as an all-in-one business management platform, when using 1Office, every employee in your company can create contracts directly on the system. In addition, you can also Digitally Sign contracts right away, which helps shorten the operational process, and the contracts are also stored on the system,…

In addition, when using 1Office, you will receive several benefits as follows:

• Automated request approval on the system
• Automated timekeeping and payroll calculation 
• Track work progress 
• Standardize workflows to help the business operate more smoothly.
• Improve work productivity, individuals can proactively track their work progress,…
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