Contract for the supply of services (pro-supplier)

Standalone contract for the supply of services between businesses, both of whom are within the UK, governed by English law and drafted generally for the benefit of the supplier.

if you are a regular supplier of services to business clients or customers
and/or where both the supplier and client/customer are based in the UK
if you want a contract prepared more for the benefit of the supplier than the client/customer

What are the key features?

cover sheet and Appendix to be completed with details of supplier, customer, services, commencement date, fees and other additional terms
Schedule of contract terms, with 23 paragraphs over 10 pages
provisions relating to commencement date and duration, supplier’s service obligations, customer’s obligations and fees and payment
exclusions and limitations on supplier’s liability
force majeure and termination clauses
restriction on customer soliciting supplier’s staff involved in the provision of the services

What else do I need to know?

A business which provides services to business clients on a regular basis may wish to do so on the basis of a standalone supply contract rather than using standard Terms and Conditions.

What terms are implied in contracts for the provision of services?

Unlike a contract for the sale of goods, relatively few terms are implied in a contract for the supply of services.

The principal applicable statute is the Supply of Goods and Services Act 1982 (“SGSA”). This implies the following terms in a B2B contract for the supply of services:

reasonable care and skill: that the supplier will carry out the services with reasonable care and skill
time for performance: if the contract is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, that the supplier will carry out the service within a reasonable time
consideration: if the price for the services is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, that the customer will pay a reasonable charge for the services

Can the SGSA implied terms be excluded or restricted?

Yes, under the SGSA and subject to the Unfair Contract Terms Act 1977 (“UCTA”), the terms implied by the SGSA can be excluded or varied by the contract itself, by the course of dealing between the parties or by usage.

In practical terms, the only implied term which is likely to be relevant is the implied term to use reasonable skill and care – the subject matter of the other implied terms is likely to be covered by the express terms of the contract.

Often, a supplier’s own form of contract will in any event expressly state that the services will provided with reasonable skill and care.

Exclusion clauses

Generally, exclusion clauses and liability limitation clauses in contracts for the supply of services are subject to the requirements of UCTA and are discussed in more details in

Supply of Goods and Services

Description

When do I use this document?

as the disclosure letter to be delivered at closing of an investment in a private limited company
for general and specific disclosures to be given by the persons acting as warrantors under the investment or subscription agreement

What are the key features?

in letter form from the warrantor(s) to the investor(s)
introductory paragraphs, linking the disclosure letter and disclosures to the warranties in the investment or subscription agreement
general disclosures of certain matters, including:
- the contents of the disclosure documents, which are usually the documents provided to the investor(s) during due diligence and to be set out in an index to the disclosure letter
- in relation to commercial property, matters available from public searches
- matters which would be available from:
  - a Companies House search of the target company
  - a winding-up search on the target company
  - a search of the UK Intellectual Property Office
- matters disclosed in correspondence between the parties and their advisers
specific disclosures against the warranties to be included in table form

What else do I need to know?

Corporate transactions usually involve one party (the warrantor) providing warranties to another party concerning the company and its business, financial performance, prospects, assets, contracts, rights and liabilities. A breach of the warranties may result in a legal claim against the warrantor for damages for breach of contract.

The warrantor may wish to disclose specific events or circumstances as exceptions to certain warranties. The disclosure of these matters is intended to shield warrantor against a potential claim for breach of the particular warranties. Instead of amending or qualifying the warranties themselves, the disclosures against specific warranties are set out in a separate letter prepared by the warrantor, known as a “Disclosure Letter”.

As an example in an investment transaction, the agreement may include a warranty that the target company has complied with all legal requirements in its business conduct. If the founders, acting as warrantors, are aware of a failure by the company to comply with a specific legal requirement, they would disclose this as an exception to the warranty. This is done by setting out a narrative of the circumstances of the breach, along with supporting documents, in the Disclosure Letter. If the disclosure satisfies the defined requirement of “fair disclosure” in the investment agreement, it should shield the founders from a claim under the investment agreement for breach of this warranty regarding the disclosed non-compliance.

The warranties may explicitly require that certain facts or documents be included in the Disclosure Letter. For instance, a warranty might require that the Disclosure Letter contains details and copies of all material contracts entered into by the target company. Failure to disclose a material contract may result in a claim against the warrantors for breach of warranty if the omission causes loss to the investor(s).

Upon receiving disclosures during transaction negotiations and discussions on the draft Disclosure Letter, the investor(s) have several options:

to accept the disclosure, with the result that the investor(s) have no legal recourse if the disclosed matter leads to an actual liability or loss
to request specific indemnity cover from the warrantors in the investment agreement to cover the disclosed matter, under which the investor(s) may be able to recover any resulting liability or loss notwithstanding the disclosure
to renegotiate the transaction terms, such as adjusting the company’s pre-investment value, or hold back some investment until the risk of a liability or loss has expired in the future
to withdraw from the transaction entirely

What other documents are available?

For a disclosure letter for use in a share purchase transaction, see

Disclosure Letter – share purchase

For a disclosure letter for use in a business purchase transaction, see

Disclosure Letter – business purchase

Explanatory Guides

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

£35.00 exc VAT

Updated by a lawyer on 03/09/2024

Updated By a lawyer on 01/05/2023

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Contract for the supply of services (pro-supplier)