What Is a Service Agreement?

A service agreement is a type of agreement that falls under the broader realm of contract law. It defines the relationship between a customer and a service provider. In short, a service agreement outlines what services are to be provided, when they are to be provided, their costs, and the responsibilities of each party involved in the agreement.

Contract law varies from country to country and region to region. As such, the exact, legally recognized definition of a service agreement likewise varies. Even within a single country, such as the United States, the precise definition changes slightly, depending on if service agreements are determined by common law or specific statute.

In terms of legal definitions and their differences in regard to a service agreement, the most common difference rests in whether the agreement is considered enforceable by a court of law. Under common law, parties are free to agree to their own terms with regard to a service agreement or other arrangement. The only requirements are compensation and mutual assent, which is reached through offer and acceptance. Under precise contract law, legally binding agreements must conform to standards and include mutual obligations, include remedies for breach, and adhere to jurisdictional law.

In general conversation, the terms service agreement and contract are often viewed as interchangeable, although a service agreement actually references more than one type of mutual obligation. Depending on the situation, a service agreement can encompass a formal contract in its entirety. For example, a cable television company enters into a service agreement with its customers to provide cable television service for a set period. Such agreements represent the entire relationship between both parties, including what services the cable company agrees to provide, the rate the customer will pay, and any penalties or caveats concerning a breach of contract on the part of either party.

On the other hand, service agreements can also serve as addenda to a contract, as is the case with a service level agreement, or SLA. For business-to-business relationships, a business agreement such as an SLA provides specifics as they relate to general contract terms. For example, a software developer may enter into a contract with another business entity to provide proprietary software. As part of the SLA, details such as when the software will be operational, how much ongoing technical support will be available, deadlines for beta testing, and other terms appear in the SLA. These terms often vary, depending on project particulars and customer needs, making it difficult to include in a standardized, template-style service contract.