Implied vs. Written Contracts: What Every Service-Based Business Needs to Know

For many small business owners in Ontario, providing services without a written contract is common practice. Whether you’re a consultant, personal trainer, nail technician, personal assistant, or hairstylist, you may rely on verbal agreements or assumed expectations with your clients. While this often works, having a written service agreement provides legal protection, prevents disputes, and ensures that both you and your client have a clear understanding of the services provided.

This guide will walk you through what a service agreement should include, when a written contract is necessary, and how to balance implied contracts (which are common in industries like beauty and wellness) with formal written agreements.

What is a Service Agreement?

A service agreement is a legally binding contract that outlines the terms under which a business provides services to a client. It establishes clear expectations regarding payment, scope of work, timelines, and other essential details.

For small business owners, service agreements serve several key purposes:

• Clarity – Avoids misunderstandings by defining the details of the service.

• Professionalism – Presents your business as structured and trustworthy.

• Legal Protection – Helps if disputes arise, especially regarding payments or service expectations.

• Client Confidence – Customers are more likely to respect policies when they’re clearly outlined in writing.

Understanding Implied Contracts

Many businesses, particularly in the beauty, wellness, and personal service industries, operate under implied contracts—agreements that are not written but are legally recognized. In an implied contract, it is understood that a service will be provided in exchange for payment, even without a signed document.

Examples of Implied Contracts in Action

• A nail salon providing a manicure with the expectation that the customer will pay upon completion.

• A barber shop where clients understand that once their haircut is done, they owe the standard service fee.

• A personal trainer working with a client on a pay-per-session basis without a written agreement.

Benefits of Implied Contracts

• Convenience – No paperwork required for routine services.

• Efficiency – Clients and businesses can operate smoothly without formalities.

• Flexibility – Businesses can adjust pricing or policies without needing to revise contracts.

However, implied contracts do not provide strong legal protection if a dispute arises. If a client refuses to pay or claims they didn’t receive the expected service, proving the terms of the agreement becomes difficult. This is why for high-value services, ongoing arrangements, or custom work, written contracts are highly recommended.

When Should You Use a Written Service Agreement?

While implied contracts work for many industries, some situations require written agreements to avoid potential problems. Consider having a contract in place when:

• The service is ongoing or long-term. (e.g., bookkeeping, IT support, legal or consulting services)

• The work is customized or requires significant time and resources. (e.g., web design, home renovations, event planning)

• The payment is substantial or made in advance. (e.g., large deposits for coaching packages, contract-based freelance work)

• There are specific terms regarding cancellations, refunds, or liability. (e.g., wedding photography, business consulting, construction work)

Essential Elements of a Service Agreement

A well-crafted service agreement should cover the following key components:

1. Parties Involved

Clearly state who is entering the agreement. Include the full legal name of your business and the client.

Example: "This agreement is made between Smith & Co. IT Solutions, located at [address], and [Client Name]."

2. Scope of Services

Describe the services being provided in detail to avoid misunderstandings.

Example: "The Consultant agrees to provide marketing strategy services, including social media audits, SEO recommendations, and email campaign setup. This does not include paid ad management or website development."

3. Payment Terms

Outline the cost, payment schedule, and accepted payment methods. Include deposit requirements, if any.

Example: "The client agrees to pay $1,500 for website development services. A 50% deposit is due before work begins, with the remaining balance due upon project completion."

4. Cancellation and Refund Policies

State your policy for cancellations, refunds, and rescheduling to manage expectations.

Example: "Clients may cancel their coaching package within 7 days of purchase for a full refund. After this period, no refunds will be issued, but sessions may be rescheduled with at least 24 hours' notice."

5. Liability and Disclaimers

Protect your business from claims or unforeseen circumstances.

Example: "The personal trainer is not responsible for injuries sustained during training sessions. Clients must disclose any medical conditions before beginning services."

6. Confidentiality Clause (If Applicable)

If your business handles sensitive client information, include a confidentiality agreement.

Example: "All client financial records will remain confidential and will not be shared with third parties except as required by law."

7. Termination Clause

Specify how either party can end the agreement if needed.

Example: "Either party may terminate this agreement with 30 days’ written notice. Any outstanding invoices must be paid before termination."

For many small business owners, a combination of implied and written agreements works best. Everyday transactions, such as one-time beauty services or standard repairs, can function under implied contracts. However, for high-value, ongoing, or customized services, a written agreement ensures both parties are protected. By using service agreements strategically, business owners can build trust, prevent disputes, and create a professional foundation for their services.