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Service Agreement Drafting

Does a service agreement need to be notarized?

No, a simple written form signed by both parties is sufficient under Georgian law for service agreements.

Can I include a non-compete clause for a freelancer?

Under Georgian law, broad non-compete clauses for independent contractors are difficult to enforce. They must be very specific in geography, time, and scope.

What taxes apply to payments to foreign contractors?

Payments to foreign non-residents for services rendered in Georgia may be subject to Reverse Charge VAT and Withholding Tax, depending on double taxation treaties.

How to terminate a service agreement?

Civil Code allows termination at any time, but the agreement usually specifies notice periods and penalties for early termination without cause.

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Service Agreement Drafting: Regulating Relationships with Contractors

In modern business, especially in startups and tech companies, hiring external specialists (freelancers, consultants, agencies) is common practice. A Service Agreement is the fundamental document regulating the relationship between the client and the service provider. A properly drafted agreement not only defines the scope of work and payment but, most importantly, protects the client's intellectual property and confidential information. Often, startups make the mistake of using generic templates, leading to disputes over the quality of work, deadlines, or ownership of the created code/design. Furthermore, there is a risk that a service agreement could be reclassified as an employment relationship, resulting in severe tax consequences.

Legal.ge offers professional services for preparing tailored agreements that fully protect your business interests and comply with Georgian legislation.

What Does Service Agreement Drafting Cover?

An agreement prepared by a qualified lawyer includes the following critical components:

  • Scope of Work: Detailed and unambiguous description of the work to be performed (Deliverables) to avoid misunderstandings regarding expectations.
  • Intellectual Property (IP) Assignment: A crucial clause ensuring that the work created by the contractor (code, logo, text) becomes the client's property immediately upon creation.
  • Confidentiality (NDA): Mechanisms to protect the company's trade secrets.
  • Payment Terms: Payment schedule, currency, tax issues, and acceptance procedures.
  • Distinction from Employment: Wording that clearly emphasizes the civil law nature of the relationship and minimizes the risk of reclassification into an employment relationship.
  • Liability and Warranties: The contractor's liability for the quality of work performed and indemnification for damages.

Common Scenarios When You Need This Service

A service agreement is essential in the following situations:

  • Hiring Developers: When a startup hires an external developer or dev shop to build an application.
  • Marketing Agency: Commissioning advertising campaigns, social media management, or branding.
  • Freelance Designers: Creating a website, UX/UI, or graphic design.
  • Business Consultants: Receiving strategic, financial, or HR consulting.
  • Outsourcing: Outsourcing accounting, legal services, or IT support.

Georgian Legal Framework

Service agreements are regulated by the Civil Code of Georgia (articles on work contracts or mandate contracts). The law grants parties broad freedom in defining terms, though mandatory norms exist. Special attention must be paid to the Law on Copyright and Related Rights, which establishes that unless otherwise provided by contract, economic copyright may remain with the author (creator). Therefore, the IP transfer clause is vital.

Additionally, considering the Labor Code of Georgia and Revenue Service practice is critical. If a service agreement has signs of an employment relationship (fixed working hours, paid leave, employer directives), it may be reclassified as an employment contract, leading to fines and tax liabilities for the company. Specialists on Legal.ge will help you draw this line correctly.

Service Process Stages

The process is simple and effective:

  1. Defining Needs: The lawyer clarifies what type of service you are commissioning and what specific risks exist (e.g., IP, confidentiality).
  2. Drafting the Agreement: A tailored draft is prepared, adapted to your business model.
  3. Review: Going through the document with the client, incorporating feedback.
  4. Negotiation with Contractor (if needed): If the other party requests changes, the lawyer helps reconcile positions.
  5. Finalization: Handing over the version ready for signing.

Why Legal.ge?

Lawyers represented on Legal.ge are well-versed in both contract law and the specifics of the tech sector. They know how to protect your code, design, and know-how. A template agreement often fails to cover all risks, while a document drafted by a professional guarantees your peace of mind. Find your lawyer on Legal.ge and regulate relationships with partners reliably.

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