How to Draft a Service Agreement in India: Step-by-Step Process

Introduction: Why Proper Drafting of a Service Agreement Matters

A service agreement is more than just paperwork—it is the legal backbone of any professional relationship between a service provider and a client. In India, where business transactions are governed by the Indian Contract Act, 1872, a poorly drafted agreement can lead to disputes over scope, payment delays, intellectual property ownership, or liability issues.

Whether you are an IT company in Bengaluru, a marketing agency in Mumbai, a consultant in Delhi NCR, or a freelancer across the country, investing time (or hiring a professional) in the drafting of service agreement is essential. A well-drafted document prevents misunderstandings, reduces litigation risk, and protects both parties.

In 2026, with the rise of remote work, gig economy, and digital services, customized service agreements have become even more critical. Many businesses in Delhi prefer to work with a service agreement lawyer or use expert draft service agreement Delhi services for faster, legally sound results tailored to local courts and stamp duty rules.

This step-by-step guide walks you through the entire drafting process so you can create a robust, enforceable service agreement.

Step 1: Understand the Purpose and Parties Involved

Before writing a single clause:

• Identify the exact nature of services (e.g., software development, content creation, consulting, maintenance).

• Clearly define who the parties are: full legal names, registered addresses, GSTIN/PAN (if applicable), and roles (Client vs. Service Provider).

• Decide on the agreement type: one-time project agreement, retainer agreement, or Master Service Agreement (MSA) with Statements of Work (SOW).

Tip: Always include recitals (background paragraph) explaining why the agreement exists.

Step 2: Define the Scope of Services Precisely

This is the most important (and most commonly disputed) section.

• List all deliverables in detail: what will be provided, formats, quality standards.

• Specify inclusions and exclusions explicitly (e.g., “revisions up to two rounds only”).

• Include milestones with dates to avoid scope creep.

• Mention any dependencies on the client (e.g., providing content, approvals, access).

Vague scope is the #1 reason disputes arise—be specific.

Step 3: Set Clear Payment Terms

Payment clauses must leave no room for ambiguity:

• Total fee or hourly/monthly rate.

• Payment schedule: advance, milestone-based, or upon completion.

• Invoicing process: when and how invoices are raised.

• GST applicability, TDS deduction (if required).

• Late payment interest (commonly 18% p.a.) and penalties.

• Mode of payment: bank transfer, UPI, cheque.

Include a clause for reimbursement of out-of-pocket expenses with prior approval.

Step 4: Establish Timelines, Term, and Termination

• Define the agreement term: start date, end date, or project-based.

• Include renewal or auto-renewal clauses (if applicable).

• Specify termination grounds: for convenience (with notice), for cause (breach), or insolvency.

• Set notice periods (usually 15–30 days).

• Outline post-termination obligations (return of materials, final payment).

Step 5: Protect Intellectual Property Rights

IP clauses are crucial, especially in creative and tech services:

• Clarify who owns the final deliverables (usually client upon full payment).

• Grant licenses for pre-existing tools/methods used by the provider.

• Address moral rights and derivative works.

• Include work-for-hire language where appropriate.

Step 6: Add Confidentiality, Non-Disclosure, and Non-Compete (if needed)

• Define confidential information.

• Set duration of confidentiality (often 2–5 years after termination).

• Include exceptions (public domain, legally required disclosure).

• Add non-solicitation or limited non-compete if justified.

Step 7: Include Representations, Warranties, Indemnity, and Limitation of Liability

• Warranties: services will be performed professionally, no infringement.

• Indemnity: protection against third-party claims.

• Limitation of liability: cap at fees paid (common practice).

• Exclude indirect/consequential damages.

Step 8: Cover Dispute Resolution, Governing Law, and Jurisdiction

• Prefer arbitration under the Arbitration and Conciliation Act, 1996 (faster than courts).

• Specify seat of arbitration (e.g., Delhi).

• Governing law: usually Indian law.

• Jurisdiction: exclusive courts of Delhi (or relevant city).

Step 9: Add Miscellaneous Clauses

• Force majeure

• Entire agreement clause

• Severability

• Notices (email + physical address)

• Assignment restrictions

• Counterparts and e-signatures (valid under IT Act)

Step 10: Review, Stamp Duty, Signing, and Execution

• Have both parties review and suggest changes.

• Check state-specific stamp duty (e.g., higher in Maharashtra, nominal in Delhi for most agreements).

• Execute: physical signatures or e-sign via Aadhaar OTP/DSC.

• Keep signed copies safe.

Why Most Businesses Prefer Professional Help for Drafting of Service Agreement

While templates exist online, they often:

• Miss India-specific clauses (GST, arbitration, stamp duty)

• Use outdated language

• Lack customization for your industry

Hiring a service agreement lawyer ensures compliance, balance, and enforceability. In Delhi NCR, many businesses opt for draft service agreement Delhi services to get quick, high-quality drafts tailored to local courts (Delhi High Court, district courts) and business practices.

Platforms like Lawchef connect you instantly with experienced service agreement lawyer professionals who handle everything online: requirement gathering, drafting, revisions, and final delivery.

Conclusion: Draft Smart – Protect Your Business

Drafting a service agreement is not just a formality—it is strategic risk management. By following this step-by-step process and prioritizing clarity, you create a document that fosters trust and minimizes disputes.

However, for the best results—especially in a complex commercial hub like Delhi—rely on professional expertise. Don’t risk your business relationships with generic templates.