white book page on brown wooden table
Vertragsmanagement

Sla Clauses: What You Should Consider in Service Contracts

  • Service level agreements (SLAs) are more than just a set of regulations that must be met. They play a critical role in protecting your business, regulating customer expectations to satisfy them, and reducing the likelihood of disputes.

What is a SLA?

The term SLA comes from English and stands for “Service Level Agreement” and is translated into German as a service-quality agreement. These define the contractually binding obligations between a service provider and its customer over the duration of their contractual relationship. In particular, it includes clarification about when and what the provider delivers and when and how much payment is due from the customer.

The most important clauses in SLA

An SLA can look very different. In fact, its content depends on various factors, such as different industries, companies, customers or individual reasons. However, there are a few current contract clauses, which every SLA should have and have established itself as common.

Clause 1: Service: Definition of agreement

When defining the agreement, the actual agreement is defined clearly and comprehensibly. More specifically, the service/service that is agreed with this contract. This also includes the type of inspection — i.e. how it is measured that the owed service has been received by the customer in full and without errors.

The review, in turn, is very dependent on the type of service involved and should be described in detail on an individual basis. Above all, however, it is important to mention the scope of services, the speed of delivery and the response time in the event of problems.

Clause 2: Consideration

As in almost every contract, the consideration, which in the case of a service-quality agreement is the remuneration, must of course not be missing. It should be worked out in advance exactly how the service will be paid for. There are various options for this, such as either a lump sum payment or an hourly payment. It is always questionable which hours can be billed.

Clause 3: Delivery time and review

The contract should specify the delivery time and place of delivery. It is also advisable to schedule review appointments in order to reflect on the quality of the service and to be able to resolve any problems. In this way, a contracting party can be prevented from being dissatisfied over a longer period of time and the contractual relationship ultimately failing as a result.

Clause 4: Measurements

As already mentioned, measurement or reference values should be agreed on the basis of which it can be verified whether, to what extent and to what quality the service has been provided. This clause is particularly useful for services, as a simple service contract requires only “action” but no measurable value. However, this is exactly what the SLA wants to stand out from and incorporate the quality of service into the agreement.

However, in order to be able to evaluate a service, it must now be determined in advance which measurement values the recipient may use to do this. Here, too, this is very dependent on the product.

A very common example of an SLA is a cloud provider agreement and a typical measurement value here would be so-called uptime, i.e. the time in which it is possible to connect to and access the cloud. The uptime is normally above 97% and if it is lower, this would be a quality defect for which the recipient can demand compensation.

Clause 5: Compensation for non-compliance

Especially when it comes to services, it can happen that the originally presented or promised service is not or cannot be completed as announced.

In order, on the one hand, to motivate the service provider to perform properly and, on the other hand, to protect the service recipient from losses, should the provider not be able to perform its service as promised, there is a clause in every SLA that deals with compensation due to non-fulfilment. This compensation clause is comparable with a contractual penalty clause, as the failure or inadequate performance of the contract is also “punished” here.

Conclusion

An SLA is a very common and helpful type of contract. When using them, however, it is important that the important clauses are filled out sensibly and in detail. With a successful SLA, both service providers and service recipients can save themselves a long and expensive legal dispute in the event of discrepancies, because a well-formulated contract will prevent any differences in the first place.

Request a Demo

Ausgewählte Artikel

How to Measure Contract Performance Efficiently in 2024

This article addresses the intricacies of measuring contract performance and provides insights into effective strategies, key performance indicators (KPIs), and the technology tools that make this important task easier. Whether you're an experienced contract manager or a novice in the field, our research will give you a full understanding of how you can evaluate and improve the results of your contractual obligations to ensure mutual success for all parties involved.

Bericht

DORA compliance through strategic contract management: A guide for financial firms

Learn how financial companies can achieve DORA compliance through strategic contract management to strengthen digital resilience in the financial sector.

Mehr zum Thema effizientere Vertragsprozesse

Contract Termination: Everything You Need to Know

This article discusses the concept of contract termination, the legal reasons for it, the steps involved, and the importance of well-formulated termination clauses.

Contract Amendments: Everything You Need to Know

In this article, we’ll dig into why these amendments are essential—how they help businesses adapt, why they’re crucial, and the step-by-step process to make them happen. Plus, we’ll explore some digital tools that make the whole amending process easier.

Sales Contract: Definition, Application and Tips

In today's fast-paced world, it can be difficult for companies to deal with sales contracts. It is essential for companies of all sizes to understand the specifics of creating, negotiating, and concluding these agreements to foster successful partnerships.

Ready to start?

Find out how top.legal increases the efficiency of your company.

illustrated arrows Illustrated pencil strokesillustrated pencil strokesillustrated pattern of dots.