What is a service Level Agreement & does my business need one in place?

Service Level Agreement

A Service Level Agreement or SLA is an agreement or contract which is put in place with a supplier and defines what service will be supplied by that supplier and at what level the service will be undertaken.

The responsibilities and priorities of the supplier in undertaking the service will also be specified within the Service Level Agreement.

Contractual Obligations

A service level agreement is effectively a set of contractual obligations often built into a contract through a number of specific clauses or drawn up itself as a separate agreement.

They are often key aspects of an agreement between a business and a supplier when the customers’ needs of that business are dependent upon the proper functioning of the supplier.

Key Provisions for a Service Level Agreement

Any service level agreement should detail the following key provisions:

  • Clearly define the services
  • Payment provisions
  • Relationship
  • Representations and warranties
  • Indemnification
  • Ownership of product
  • Confidential Information 
  • Force Majeure

Clearly defined Services

It is imperative that the performance of the services for which the service level agreement relates to are clearly defined along with any deadlines for the performance.

Service levels which are concerned with technical performance should be provided in an exhibit to the agreement and should be stated in very accurate detail ensuring that they are properly defined.

Payment Provisions

You should ensure that the agreement includes provisions in relation to how much is to be paid for the service, when this is to be paid and what will included in the payment such as expenses, taxes and travel.

Procedures for invoicing and penalties for late payment should also be clearly defined within the service level agreement.

Relationship

A standard service level agreement should include a clause that clearly defines the relationship between the parties and states that it is not a partnership, joint venture or employer employee relationship. Often these relationships can be implied by law so it is imperative that this clause is contained within the agreement.

Representations and Warranties

This clause will be concerned with detailing the proper performance of the services the supplier has been contracted to perform. The clause may consist of the following:

  • That the services will be performed at proper industry standards
  • That the performance of the contract is not infringing any third party rights
  • That the performance of the contract is not infringing any other contract that the supplier may have in place

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For more information on:

  • Indemnity
  • Ownership of Product
  • Confidential Information
  • Force Majeure