Service contract

April 03, 2025

What is a service contract?

The service contract is regulated in §§ 611-630 of the German Civil Code (BGB). According to the definition of a service contract in § 611 BGB, the person who agrees to provide a service is obliged to provide the service. This is why the service contract is often also referred to as a ‘service agreement’. In return, the other party undertakes to pay a previously agreed fee. The service contract is therefore concluded between the party entitled to the service, who is the creditor of the service, and the party obliged to provide the service, who is the debtor.

How does a service contract is concluded, when can it exist and what must it look like?

Since the written form is not required for the conclusion of the service contract, it can be concluded informally and thus also orally. The parties to such a contract should first agree on what the mutual rights and obligations should be. In other words, what should be provided at what price? When should the service be provided? Can the debtor use the help of third parties? What happens if the service is not provided as agreed (in terms of time or quality)? Should the contract be terminable or end on a previously agreed fixed date? These are just a few of the considerations that may arise. Although an oral agreement would be sufficient, it is recommended to put the agreement in writing. On the one hand, this creates legal certainty. On the other hand, it forces the parties to talk about what they want and to agree. This prevents follow-up conflicts and creates clarity for both sides.

The fact that an employment contract can also be concluded orally means that a contractual obligation can arise from a simple conversation in which the parties share their ideas with each other and agree on the essential points. An employment contract can also be concluded by email. This also applies to sending the agreements as a scanned document. Unlike in cases where written form is required, it is not necessary to use an electronic signature (e.g. Docu Sign).

The following details should be included in the employment contract:

• Naming the contracting parties
Determining the type, scope and duration of the service to be provided;
Remuneration and the necessary payment terms
Completion dates
Since it may happen that the service is not provided as desired, the consequences of a defect should be determined (liability issues)
Expiration, termination and/or completion of the service relationship

If the service is not paid for as requested, it is advantageous in the event of a dispute to have a detailed written agreement on the content of the service and the scope of performance.

The following details should be regulated in the service contract:

Naming of the contracting parties
Determination of the type, scope and duration of the rendered service;
remuneration and the necessary payment modalities
Completion dates
Since it may happen that the service is not provided as desired, the consequences in the event of a defect should be determined (liability issues).
Time lapse, termination and/or termination of the service relationship

Should the service not be performed as desired, it is advantageous in case of conflict to set out in writing a detailed agreement on the content of the service and the scope of performance.

What exactly is owed by the service contract?

The service contract obliges the debtor to provide a service. Here, the subject matter of the contract constitutes services of any kind according to section 611 (2) BGB. It should be noted that the service provider is obliged to provide the service personally according to section 613 BGB. However, the parties may contractually agree otherwise. Essential for the differentiation from a contract to produce a work is that no specific performance result is owed (unlike in a contract for work). Only the service, i.e. the performance of the desired activity, is required.

What must be considered in a service contract ?

The object of the service contract can be a service of any kind. The person entitled to the service does not owe any concrete success, but only the use of labour. The labour input leads to the fulfilment of the contract. Thus, the doctor does not owe the concrete healing of the patient, but his treatment according to the valid rules of art, just as the lawyer owes the proper conduct of the case in compliance with the applicable laws and the supreme court guidelines, but not the winning of the case.

It is therefore important that the stipulated remuneration according to section 614 BGB is paid for work performed, even if the desired success is not achieved. However, the remuneration is always due only after the service has been completed, so the service provider is obliged to perform in advance, unless otherwise agreed.

In the event of defective performance, the claim to remuneration cannot be reduced as in the case of a reduction. However, non-performance constitutes a breach of duty, whereby the debtor is in default.

The person entitled to the service must comply with certain duties of care, such as the duty to care for the sick under section 617(1) BGB and the duty to ensure protective measures under section 618 BGB. The BGB further stipulates that these duties of care cannot be waived by contract.

General grounds for invalidity may also apply to a service contract. This is to be assumed according to § 134 BGB if the contract violates a legal prohibition, for example, if undeclared work is carried out by means of the service contract. Nor may it be contrary to morality under section 138 BGB, which may be the case if particular inexperience is exploited.

Requirements of the service owed and consequences of not fulfilling this service

The service provider is obliged by section 611 I BGB to perform the service. In case of doubt, he is obliged to perform the service himself. If the service cannot be provided, the service recipient has the right to terminate the relationship.

In the case of a service contract, poor performance cannot be justified by the fact that the desired result did not occur, since unlike in the case of a contract to produce a work, only the performance of the agreed service is owed. Accordingly, only the improper performance of the act can be asserted. Thus, the service provider has a claim to payment of wages if the performance of the service was carried out conscientiously.

Possible rights of rescission that want to be asserted before the expiry of the service contract are superseded by the existence of the rights of termination as special provisions under section 626 BGB.

When is a service contract terminated and how can a service contract be terminated?

According to section 629 I BGB, a valid fixed-term employment contract is deemed terminated upon expiry of the agreed term.

Furthermore, the employment contract may be terminated by notice of termination. The termination of the employment relationship does not require the written form. This results from section 623 BGB, which only refers to employment relationships. Since the written form requirement does not apply to the termination of the employment contract, as it does to the conclusion of the contract, no particular form is prescribed. For example, unlike an employment contract, the termination of a service contract can be given orally or communicated by email. In contrast to an employment relationship, the termination of a service contract does not constitute protection against dismissal.

In the case of fixed-term service contracts, the ordinary right of termination is generally excluded. However, the parties to the contract may agree on a provision deviating from this principle, which makes it possible to give ordinary notice of termination even within the framework of a fixed-term contract. If the duration of the employment relationship has not been determined and cannot be inferred from the nature or purpose of the service, either party may give notice of termination. The provisions of sections 621 and 623 of the Civil Code apply.

Extraordinary termination of the employment relationship is possible in any case if there is good cause, section 626 BGB. This is the case if the continuation of the employment relationship is no longer reasonable. In this case, the interests of the parties must be weighed against each other and the circumstances of the individual case must be taken into account.

Can a service contract be limited in time and if so, how often?

Unlike in employment law, a service contract can be limited in time without any restrictions or reasons. If the service contract is limited in time, it is not necessary to terminate it when it expires. Since the law does not specify a maximum period for which a service contract relationship may be limited, a service contract may be limited for any length of time. If the fixed term is regulated in general terms and conditions (GTC), this may be invalid if the commitment is unreasonably long in accordance with sections 307 cont. BGB. The service contract then runs for an indefinite period and can be terminated with due notice.

How does the service contract differ from the contract to produce a work?

The difference between a service contract and a contract for work and services is the obligation to produce a specific work. The production of the specific work is the result that is owed. If the work performed does not meet the requirements specified in the contract for work and services, the contract for work and services is deemed not to have been fulfilled or to have been poorly fulfilled. This must be examined on a case-by-case basis. In summary, the focus of a service contract is on the provision of the service, whereas a work contract requires the occurrence of the specific result that is owed. Whether a service or a work contract is involved can therefore be determined by considering the overall picture and the existence of an owed result.

In practice, it can be extremely difficult to determine with certainty whether a service or a work contract has been agreed. However, it can be relevant for determining whether a work or service contract applies and which claims can be asserted in the event of defects.

In practice, difficulties in classification can be seen particularly in the area of software development. In software development, a service contract or a work contract can be agreed. In practice, it is often difficult to distinguish between the two, since in most cases a contract type is not deliberately selected, but rather the mutual rights and obligations are defined and a framework for the service structure is negotiated. In particular, the treatment of preparatory and advisory actions is often problematic. For example, in an IT project, from the consultation to the implementation of jointly developed ideas, maintenance and other services are also agreed, so that the assignment to a contract type can be very complex and difficult.

Frequently, both service contract and work contract elements can be found in IT or software development contracts. In legal terms, this is referred to as a mixed or mixed-type contract. This is because some service elements may be subject to a specific outcome (which then points to a contract for work and services), while for other elements only the service itself is owed and no specific outcome is required (for example, in the case of consulting, maintenance or other services). If a contract for work and services is established, the customer is obliged to accept the service. This has an effect on the distribution of the burden of proof with regard to the freedom from defects of the subject matter of the contract. In the case of a service contract, it is sufficient to show that the agreed service has or has not been provided. In the case of a contract for work and services, the principal must show and, if necessary, prove that the work has not been carried out as agreed. This is often associated with considerable effort and entails risks in the event of a dispute. The only preventive measure that can be recommended is to describe the service owed as precisely as possible (e.g. in a so-called specification), so that the question of whether the service was in accordance with the contract or defective is easier to answer.

Typical types of contracts that come in the form of service contracts

Consulting contract
Treatment contract
Teaching contract
IT contract
Software contract
Network maintenance contract
Influencer contract
Mandate contract
Insurance contract