Service Level Agreements (SLA’s) – Here’s what you need to know about them.
A Service Level Agreement (SLA) is a contract that sets out the services that one party has agreed to render to another. The parties to a Service Level Agreement are often referred to as service provider and client. The service provider being the party that renders the services and the client being the party who receives the services rendered or receives the goods produced as a result of those services.
An SLA usually exists between a business and its customers/clients. Regardless of what type of SLA exists between parties there are common building blocks that should be included in each SLA.
In this blog we evaluate some of the key concepts and clauses that should be included in all Service Level Agreements, and provide some background on why these are important!
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Contents of this blog;
Commencement, Duration and Termination
It is of importance that the parties to the agreement agree on when the agreement will come into effect and for how long the agreement will be in existence for. The agreement should provide clarity on how the agreement will be terminated and which of the parties will be allowed to terminate the agreement and if they will be allowed to end the agreement without reason and the notice period in such a case.
This clause is one of the most important clauses in the entire agreement. Here you will find the details of the services that the service provider has agreed to render to the other party. A brief summary of the services, to whom and how the services will be delivered are details that you would also want to include in this clause.
An SLA should provide clarity on how the success of the services rendered by the service provider is to be measured or approved. Parties should agree on what measurement will be used to measure the success of the services and how and when the success should be measured, within the agreement.
Service Variation means a material change in the services that is made at the reasonable discretion of the Service Provider or at the request of the client. It is important that the process to be followed if the service provider needs to make an adjustment to services be clearly stated within the agreement.
In the Service Variation clause, it would be advisable to include how the service provider should go about obtaining the consent of the client to vary the services. In the instance of service variation, the fees in respect to services rendered may also need to be adjusted. It is then important that this clause clarifies the procedures to be followed for the service provider to obtain consent from the client to effect a fee adjustment.
As with any agreement that involves compensation, there should be clarity on the fees that will be charged for services rendered. The fees should be agreed upon and the details of when, how often and how payment will be made should be clarified in the agreement. The agreement should state whether the service provider will require a deposit before starting to render services, and if so, how much that deposit will be, when and how it will be paid. Parties may also agree on the penalties that may be imposed should one of the parties make a late payment.
While rendering services to the client, intellectual property, including inventions, product designs, creative works etc, may be created. For the avoidance of any doubt, it is thus very important to ensure that the parties agree on which party will retain ownership of any and all intellectual property that is created by the service provider while rendering services to the client.
Apart from the above, all Service Level Agreements should contain standard boiler plate clauses (or standard clauses) which are included to ensure certainty and prevent ambiguity.
These clauses would include, for example:
Domicilium and Notices
Governing Law and Jurisdiction
Force Majeure Event
Dispute Resolution Procedures
Non-Variation of Agreement Provisions
Whole Agreement provisions
To understand more about boilerplate clauses, please read here.
At Hello Contract, we have taken into account all of the above considerations so that you can create a version of a Service Level Agreement that is perfectly suited to your needs, and which is available here.