Those who commission specialists or external service providers are often faced with the question: Which type of contract is the right one? Service contract or contract for work? The choice has a significant impact on liability, remuneration and the obligations of both parties. A common mistake in practice: the wrong type of contract is chosen - with legal and tax consequences.
In this article, we explain the most important differences, when which contract is suitable and what clients and contractors need to know.
What is a service contract?
A service contract is a contract under which the party obliged to provide a service undertakes to Performance of services without a specific result being owed (Sections 611 to 630 BGB). The service contract relates to the provision of activities or services. The party obliged to provide services is not liable for the result of its work, but only for the performance of the agreed activity.
Typical examples of service contracts:
- Education: Teachers who give lessons
- Healthcare: Doctors and nursing staff who provide medical services
- Consultancy: Management consultants who provide strategic or operational support
- IT: IT support staff who provide technical support
What is a contract for work?
A contract for work is a contract under which the contractor undertakes to Production of a specific work (Sections 631 to 650 BGB). In contrast to the service contract, the contract for work and labour focuses on the result. The contractor owes the customer a specific work and is liable for its freedom from defects and completion.
Typical examples of contracts for work and labour:
- construction industry: Construction of buildings and infrastructure projects
- Mechanical engineering: Manufacture of machines and systems
- IT: Development of customised software solutions
- Art and design: Creation of artwork, graphics or marketing materials
What is the subject of the contract?
The Object of a service contract is the provision of a specific activity or service. Examples of this are employment contracts in which the employee provides their labour or consulting contracts in which the consultant offers their expertise. The party obliged to provide services is not responsible for the success of the activity, but only for the provision of the agreed services.
The Object of a contract for work is the production of a specific work. The work can be tangible (e.g. building a house) or intangible (e.g. creating a software programme). The contractor is responsible for the end result and is liable for ensuring that the work fulfils the contractual requirements and is free from defects.
What are the obligations of the parties involved?
| Role | Service contract | Contract for work |
|---|---|---|
| Contractor | Must provide the agreed service without being liable for a specific result | Must produce the agreed work free of defects and on time and hand it over to the customer |
| Client | Is obliged to pay the agreed remuneration, regardless of the success of the service | Is obliged to pay the agreed remuneration, but only once the work has been accepted and recognised as free of defects |
Which contract is suitable for which areas?
Service contracts are widely used in many industries, especially where the continuous provision of services is involved - for example in education, healthcare, consulting and IT support.
Contracts for work are used in industries where the production of a specific work is involved - typically in the construction industry, mechanical engineering, IT development, art and design.
Liability and warranty in comparison
A central difference lies in the LiabilityIn the case of a service contract, the contractor is only responsible for the work - if the desired result is not achieved despite correct performance, the contractor is not liable. In the case of a contract for work, on the other hand, the contractor is responsible for the outcome. If the work is defective, the customer is entitled to rectification, reduction or compensation.
The statutory warranty period for contracts for work and services is generally 2 years from acceptance (§ 634a BGB), for buildings 5 years.
Work contract with subcontractors - why it's the right choice
For the commissioning of subcontractors, the Contract for work and labour the preferred form of contract - and for good reason: the subcontractor owes a concrete, defect-free result. He works under his own professional supervision, bears the entrepreneurial risk and is liable for defects. The right to issue instructions remains with the subcontractor - not the client.
This is also the decisive difference to temporary employment: in the case of a contract for work and labour, there is no integration into the client's company organisation, no obligation to follow instructions and no fixed working hours - all characteristics that make a Bogus self-employment exclude.
Important for clients in the construction industry: Pursuant to Section 1b of the German Temporary Employment Act (AÜG), hiring out employees in the construction industry is generally prohibited. The contract for work and labour with a subcontractor is the only legally secure alternative here. Global Business Recruiting issues all contracts for work and labour by lawyers - legally compliant and tailored to your requirements.
Conclusion: Service contract or contract for work?
| Criterion | Service contract | Contract for work |
|---|---|---|
| Due | Activity | Result / Work |
| Liability | Only for the performance of the activity | For freedom from defects and completion |
| Remuneration due | Regardless of success | After acceptance of the work |
| Right to issue instructions | Often with the client | At the contractor (subcontractor) |
| Typical for | Consultancy, maintenance, IT support | Construction, industry, trade, software |
| For subcontractors | Rare | Standard - legally recommended |
Frequently asked questions about service contracts and contracts for work
In the case of a service contract, an activity is owed - without an obligation to succeed. In the case of a contract for work, a concrete, defect-free result is owed. In the case of a contract for work, the contractor is liable for ensuring that the work fulfils the agreed requirements.
A contract for work and services makes sense if a clearly definable result is expected - e.g. the construction of a building, the development of software or the installation of a system. The client only pays after successful acceptance.
Yes, provided both parties agree. The decisive factor is what is agreed in the contract and what the actual cooperation looks like. In case of doubt, courts decide on the basis of actual practice, not just the title of the contract.
The name of the contract is not decisive - it is the content that matters. If a work is actually owed, the provisions of the law on contracts for work and labour apply, even if the contract is called a „service contract“. This can have unexpected liability consequences.
When seconding foreign specialists via Global Business Recruiting, a contract for work and labour is usually used - the commissioning company receives a clearly defined service. Care must be taken to ensure the correct distinction is made between this and the supply of temporary workers.
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