An outsourcing agreement is one that lays down the terms and arrangements which govern the transfer of some or all of an organisation's internal functions to a specialist third party.

Outsourcing may take place within the organisation's own country or may involve the transfer of the outsourced operations to a new jurisdiction.

Such processes are a common reality of the twenty-first century global economy – increasingly as it relates to work in the digital or "virtual" sphere.

Some of the most commonly outsourced operations include the following:

  • Data and information storage
  • Telecommunications
  • Financial services – e.g. accounting
  • Manufacturing
  • Research and development
  • Legal services
  • Web hosting
  • Engineering

Ensuring a good outsourcing agreement

Clarity is the key to a good outsourcing agreement. This means that the precise roles and obligations of each party should be clearly defined.

Good legal advice from a suitably experienced commercial lawyer is an essential part of ensuring a balanced and workable agreement that is beneficial from the outset. This means that both parties should be clear about both the extent and nature of the contract's service level agreements.

Service levels

A good commercial lawyer can help parties to an outsourcing contract agree upon service level targets so that there is no confusion as to the various rights and obligations involved.

Such clarity is essential to a good outsourcing contract and can help avoid unnecessary doubt and dispute.

In addition, the outsourcing agreement should clearly define the methods that will be used for service level measurement as well as any penalties or damages deemed appropriate in the event that the agreed service levels are not met.

It is vitally important that the agreed service levels are fair and reasonable – if they are unnecessarily unrealistic this can lead to considerable stress and contention.


Issues around termination are a common cause of outsourcing disputes – as such it is vital that your contract is clear regarding termination.

This can be achieved through the intelligent use of exit strategies, contingency plans and partial termination arrangements. Whatever the case, your termination options should not be overlooked.

Outsourcing agreements lawyers

Oratto's membership is comprised of many of the UK's leading commercial lawyers – as defined by Legal 500 and Chambers & Partners – and can work to ensure that all the key concerns are addressed when drawing an outsourcing agreement or considering your rights in relation to one to which you are already a party.

Make the most of your outsourcing agreement opportunities by connecting with an Oratto member lawyer today.