Insurance terminology explained in simple terms
With a service contract, the agent owes the principal a certain service over a certain agreed period of time.
Example: A company needs support over a certain period of time because a department can no longer cope with the orders due to an unusually good order situation. To temporarily compensate for this bottleneck, the company hires a freelancer to support the team. The freelancer does not owe a specific work result (as in a work contract), but the agreed support service. The company therefore concludes a service contract with the freelancer.
With a service contract, the freelancer does not owe any concrete success, but they still have to deliver a certain quality. In the event of poor performance, the principal can assert a claim for compensation. The contractual relationship ends after the agreed duration or upon termination in the case of a service contract. If the contractual relationship is to be terminated prematurely, this can be done by giving notice in compliance with the statutory notice periods.
Conventional employment contracts are also service contracts, but no duration is agreed here, the employees do not provide independent services and are bound by the instructions of their employer.
Term: Service Contract
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