Service Level Agreements - key points

What is a Service Level Agreement (SLA)?

A Service Level Agreement (SLA) typically forms part of, or sits alongside, a main services contract between a supplier and a customer, often as an annex, appendix or separate specification.

Keeping service levels separate from the main contract can make it easier to update technical specifications and performance targets without renegotiating the main terms and conditions. Any amendment must still comply with the contract’s variation provisions.

SLAs often contain technical detail, so the lawyers drafting them will usually rely on their client’s operational input. Their role is to ensure that the requirements are clearly expressed, measurable and consistent with the main services agreement.

Common uses of a Service Level Agreement

SLAs are commonly used for long-term, business-critical arrangements, including IT outsourcing and property maintenance, but can also apply to other performance-based services, such as marketing.

Depending on the service, the organisation’s requirements and the level of customisation needed, an SLA may be tailored to the customer or set out standard service packages. For example, it may specify the support or maintenance available under bronze, silver or gold packages.

Key terms in a Service Level Agreement

An SLA, particularly for IT services, may cover:

• The specific service standards and performance levels the customer can expect.
• How performance will be measured and reported.
• The remedies available if agreed service levels are not met.
• Response times for different categories of problem, including escalation procedures for urgent issues or those requiring specialist support.
• Support hours and contact methods, such as helpdesk telephone lines and email, including whether support is available 24/7 and how out-of-hours requests are handled.
• Problem categories, how issues will be resolved and whether remote support or attendance at the customer’s premises is required.
• Service fees, what each package includes and when additional charges may apply, such as for out-of-hours work, weekends, public holidays or replacement parts.
• Severity levels, such as critical, major and minor, with separate targets where appropriate for acknowledging an issue, responding to it and resolving it.
• Overall performance targets, such as a required percentage of service availability, together with any agreed exclusions for scheduled maintenance or updates.
• Arrangements for obtaining and charging for consumables, spare parts and other resources needed to resolve issues.

Service Levels, Service Credits and Termination

An SLA should explain the consequences of failing to meet agreed service levels. Supplier-drafted SLAs may offer limited remedies unless the customer negotiates suitable protections.

For example, repeated failures to meet specified targets within a particular period may entitle the customer to service credits, which reduce the fees payable for the services. The agreement should define how credits are calculated, when they apply and whether they are the customer’s exclusive remedy for the relevant failure.

The main services agreement may also specify when repeated or serious failures amount to a material breach or persistent breach entitling the customer to terminate. The relevant thresholds, notice requirements and any opportunity to remedy the breach should be clearly defined.

Excluded items

An SLA should identify what is included in the agreed service package and what falls outside its scope. Exclusions may cover issues caused by the customer, third parties or circumstances for which the supplier has not accepted responsibility. The agreement should define these exclusions clearly to avoid uncertainty over responsibility for resolving an issue.

Where a supplier can provide services that are outside the agreed package, the SLA or main agreement may allow the customer to request them as additional work. The supplier can then quote separately, with any additional work subject to agreed fees, terms and service levels.

Beware waiver of breach of a Service Level Agreement

A detailed SLA is only effective if its terms are monitored and enforced. If a customer repeatedly accepts failures without invoking the agreed remedies, this may complicate later attempts to enforce its rights, depending on the contract and the parties’ conduct.

Customers should record service failures, follow the agreed notification and escalation procedures, and take timely advice where breaches continue. Suppliers should also address recurring failures promptly and document any agreed variations or concessions.

Legal support for a Service Level Agreement

We advise on drafting, reviewing and negotiating Service Level Agreements, helping customers and suppliers define clear service expectations, allocate responsibility and agree appropriate remedies. We also provide advice on disputes involving SLAs, including failures to meet service levels and the remedies available under the contract. Contact us to discuss your requirements.