Introduction: Why the right type of contract is crucial
There are many gray areas in the world of contracts that can often lead to confusion. Especially in the context of IT projects, software development and other technology-driven services, it is crucial to choose the right type of contract. Two of the most commonly used types of contracts are the contract for work and the contract for services. Both have their own advantages and disadvantages, but what really distinguishes them from each other?
The contract for work and services, regulated in §§ 631 ff. BGB, refers to the production or modification of an object or the achievement of a certain success. This contrasts with the service contract, which is governed by Sections 611 et seq. BGB (German Civil Code). Here, the service provider undertakes to perform the promised services, but without guaranteeing any particular success.
Choosing the right type of contract can have far-reaching consequences, both financially and legally. Therefore, it is essential to know exactly the differences and areas of application. In this article, we will dive deep into the subject and use examples from various industries to illustrate the differences.
Software development: contract for work or contract for services?
Contract for work in software development
If a company has specific software developed that must fulfill certain functions, it is usually a contract for work and services. The developer is obliged to deliver a working end product. Here, milestones and acceptance processes are particularly important to measure the success of the plant.
Service contract in software development
However, if a software developer is only hired for a certain period of time to work on various projects without a specific end product being required, this is more likely to be a service contract. In this case, the developer’s working time is the main focus, not the final product.
Freelancers and programming: flexibility vs. goal orientation
Contract for work for freelancers
A freelancer who is hired to create a website usually works on the basis of a contract for work. Success is clearly defined here: a functioning website. Often, specific deadlines and quality standards are also defined here.
Service contract for programmer
A programmer who is hired for general coding tasks with no expectation of a specific end product is working under a service contract. Here, the focus is on job performance, and there are usually no specific success criteria.
SaaS (Software as a Service): Custom vs. standard
Contract for work in the SaaS area
If a SaaS provider develops a customized solution for a company, this can be considered a contract for work and services. The supplier is obliged to deliver a software solution that meets the agreed requirements.
Service contract in the SaaS area
However, the ongoing maintenance and updating of the software would more likely fall under a service contract. Here, the service provider is paid for their time and expertise, whether or not new features are added.
Esport and Games: Tournaments and Organization
Esport contract for work
The development of a special Esport tournament format could be considered a contract for work. The organizer is obliged to organize a tournament that meets the established criteria.
Esport service contract
The general organization and execution of esport events falls more under a service contract. Here, the focus is on service, and there is no guarantee that the event will be successful.
Conclusion: Choosing the right contract is crucial
These are just a few examples that illustrate the difference between a contract for work and a contract for services. Choosing the right type of contract is critical to the success of a project and can also have legal implications. It is therefore advisable to obtain detailed information and, if necessary, legal advice before concluding a contract.