Service level agreement

A service level agreement sets out what a supplier will deliver, how well it has to be delivered, and what happens when it is not. The last of those is what gives the document its value. Without a stated consequence a service level is a statement of intent, and the only remedy is a claim for breach in which the customer has to prove its loss.

It is built to sit inside a larger contract

This template is drafted as a schedule to a services contract or a software agreement rather than as a standalone document, and clause 2 sets out how it fits and which document wins if the two conflict. It can be signed on its own, in which case keep the general clauses at the end and complete the parties block. Getting the order of precedence right matters more than it sounds: where the main contract caps liability and the schedule promises credits, the two have to be read together or the customer finds the cap has swallowed the remedy.

Set targets the supplier can actually hit

Three questions decide whether the document is usable. What is measured, in terms both parties can verify: availability over a stated period, response time from a defined starting point, resolution time by severity. How it is measured and by whom, since a figure calculated solely from the supplier's own monitoring is difficult to challenge. And what follows a failure.

On the numbers, 99.9 per cent is far harder to reach than 99.5 per cent, and the difference is about four hours of downtime a year. A target missed every month costs the supplier money and the customer its confidence, so the honest figure is better for both sides than the impressive one.

Service credits, and what they are not

The credits here are drafted as an agreed adjustment to the price rather than as a penalty, which is deliberate: a clause that operates as a penalty for breach risks being unenforceable. They are also capped. Before raising the cap, or making credits the sole remedy for anything beyond the failures they actually cover, it is worth taking advice, particularly on a contract the business depends on.

What to complete before signing

Schedule 1 carries the services, the service hours and the fees the credits are calculated against. Schedule 2 carries the support channels and the escalation contacts. The targets themselves sit in the tables at clauses 5, 6 and 9, and every figure in them needs checking rather than accepting. Exclusions deserve the same attention: planned maintenance, third party failures and customer-caused issues will be carved out, and how those carve-outs are drafted determines how much of the service level is left.

Where the supplier will process personal data on the customer's behalf, Article 28 of the UK GDPR requires separate terms, which the data processing agreement provides. For a contract the business depends on, or one being signed on a customer's paper, our commercial contract solicitors review the schedules and the liability clause together.