Service agreement: maintenance and ongoing work

Many businesses deliver ongoing services: maintenance of machinery, cleaning of premises, garden service, security, catering and property service. These ongoing service relationships deserve a clear written agreement, namely a service agreement.

A service agreement (service contract) differs from a consultancy agreement and an IT contract by focusing on physical or operational services that are performed on an ongoing basis and typically at a fixed price. It creates predictability for both parties and reduces the risk of conflicts about what is included in the price.

What is a service agreement?

A service agreement is a contract for the ongoing delivery of a service from a service provider to a customer for payment.

Typical service-agreement relationships:

• Technical maintenance: machinery, ventilation systems, lifts, cooling systems
• Property service: cleaning, window cleaning, caretaking, garden service
• Security: guard patrols, alarm service, access control
• Catering and canteen: ongoing catering at the workplace
• Copiers and printers: service agreements on office equipment
• HVAC and plumbing: ongoing service on building technology
• Software (on-premise): maintenance and support agreement for installed software

What distinguishes a service agreement from other contracts?

Contract	Characteristics
Service agreement	Ongoing service, typically physical, fixed price or retainer
Consultancy agreement	Advisory service, varying scope, project- or hourly-based
Construction contract	A defined project with a start and end
Employment contract	An employment relationship with an employer

What should a service agreement contain?

1. The parties

The provider's and customer's full company name, CVR number and address.

2. Description of the services

A detailed description of what the service agreement covers. Specify:

• Which specific tasks are performed?
• What is the frequency (daily cleaning, monthly machine service, quarterly inspection)?
• What is the geographic scope (which locations or machines)?
• What are the standards for the performance?

Example (cleaning agreement): "Daily commercial cleaning of the office facilities at the address XX, including vacuuming of all floors, wiping of desks and surfaces, cleaning of toilets and the kitchen, and emptying of bins. Window cleaning is not included."

The more precisely the scope is described, the easier it is to determine whether the provider has met the agreement.

3. Service level and quality standards

Define what "correctly performed" means:

• A reference to relevant standards (for example a recognised quality standard for cleaning)
• Photo documentation of the service performed
• Supervisory visits and inspections

4. Response time for faults and emergencies

• Within what time does the provider respond to an acute fault?
• When is emergency service available?
• What does an emergency call-out cost?

5. Price and payment terms

Pricing:

• A fixed monthly price (retainer or subscription)
• A price per visit or service
• Unit prices for extra services

Payment terms:

• The billing interval (monthly, quarterly)
• The payment deadline (typically 14-30 days net)
• Default interest on late payment under the Interest Act (the central bank's lending rate plus 8 percentage points, unless otherwise agreed)
• Price adjustment: state whether the price is adjusted annually, for example by Statistics Denmark's net price index

6. Access and keys

Does the provider need access to the customer's premises?

• Handing over a key or access code
• Liability for the loss of a key or misuse of access
• Loss of access on the end of the contract

7. Materials and equipment

Who provides cleaning products, spare parts, tools etc.?

• The provider supplies all equipment and materials
• The customer makes the facilities available (electricity, water, storage)
• Any requirements for approved or environmentally friendly products

8. Insurance

The provider should have taken out:

• A commercial liability insurance (covering damage to the customer's property and persons)
• An occupational injury insurance for the provider's employees

Require documentation that the insurance has been taken out.

9. Staff matters

Does the customer have any influence over who performs the service?

• The right to require a different employee in the event of serious problems
• Background checks and a criminal record (relevant for security, care etc.)
• Employees versus subcontractors

10. Breach and defects

What happens if the provider performs the work defectively?

• The right to re-performance (remedy)
• A proportionate reduction in the price
• Compensation for a documented loss
• Cancellation on repeated or serious defects

11. Termination

• The contract period and any automatic renewal
• The notice period (typically 1-3 months)
• Cancellation without notice on material breach
• Payment on termination in the middle of a billing period

12. Confidentiality

Service staff often gain insight into the customer's business. A confidentiality provision prevents the disclosure of internal information.

Service agreement vs. trading agreement

A service agreement focuses on the delivery of services. A trading agreement is broader and covers the whole trading relationship, including product deliveries. Many businesses have both.

Service agreement for private customers

If the service is delivered to a private consumer (not a business), the consumer-protection rules apply, including:

• The right of withdrawal within 14 days for distance sales and for agreements made away from the trader's business premises (the Consumer Contracts Act)
• For an ongoing agreement, the consumer can under section 28 of the Consumer Contracts Act terminate the agreement with 1 month's notice to the end of a month, once 5 months have passed since the agreement was made, regardless of an agreed binding period
• A requirement that the consumer receives confirmation of the agreement on a durable medium

Service agreements between businesses (B2B) are not subject to these consumer-protection rules, and here there is broad freedom of contract on, for example, binding periods.

Price adjustment in long-term service agreements

Service agreements typically run over 1-5 years. Wage costs and material prices rise over time. It is common practice to include a price-adjustment clause:

• Net price index (NPI): Statistics Denmark's index for consumer prices
• Wage index: adjustment based on wage development
• Fixed percentage: a fixed annual price increase (for example 2-3%)

If a price-adjustment clause is missing, the provider is locked into the price, which can make the agreement unprofitable in the long run.

Frequently asked questions about service agreements

Can we terminate a service agreement if we are dissatisfied with the quality?

On repeated or material breach, the agreement can be cancelled. But define in advance what constitutes material breach. A single unsatisfactory visit is typically not enough, and the provider should have the opportunity to remedy it.

Can the provider terminate the agreement if the customer does not pay?

Yes. Non-payment is typically a material breach that gives the right to cancel. The provider should, however, follow a reasonable reminder procedure before cancelling.

Are there formal requirements for a service agreement?

No, an oral agreement is legally binding but hard to prove and enforce. A written agreement with clear services and prices is strongly recommended.

What happens to ongoing agreements on a business transfer?

It depends on the contract. Many service agreements contain a clause that the contract cannot be transferred without the other party's consent. Check this on a business transfer.

Conclusion

A service agreement is an investment in a well-functioning supplier relationship. It creates clarity about what is delivered, when and at what price, and it protects both parties against unclear expectations and disputes. Use a well-crafted template and adapt it to your specific service.

---

The content of this article is for guidance only and does not constitute legal advice. Contact a commercial lawyer for advice on your specific service agreement.