# Service Level Agreement (SLA)

Source: https://contracko.com/clause-library/service-level-agreement

# Service Level Agreement (SLA)

Defines measurable service standards (uptime, response times) and the credits or remedies when they are missed.

## What it is

An SLA sets quantified performance targets for a service (availability, response and resolution times, capacity) and the consequences if the provider falls short, usually service credits. It turns vague quality promises into measurable obligations.

## Why it matters

For SaaS and managed services, performance is the product. A clear SLA aligns expectations, gives the customer a remedy short of termination, and protects the provider by capping that remedy at agreed credits.

## How to apply it

- Define each metric, its measurement method and the measurement window.
- Set service credits as a percentage of fees, tiered by severity of the breach.
- Carve out planned maintenance and force majeure from availability calculations.
- Add an escalation path and, for chronic failure, a termination trigger.

## Sample wording

> The Provider shall maintain 99.9% monthly availability of the Service. For each 0.1% below target, the Customer receives a service credit of 5% of the monthly fee, up to a maximum of 50%.

## Negotiation tips

- • Customers should make chronic SLA failure a ground for termination, not just credits.
- • Providers should make service credits the sole remedy for missed targets.

## Common pitfalls

- • Setting metrics with no agreed measurement method, making breach impossible to prove.
- • Forgetting to exclude scheduled maintenance from uptime calculations.

### How Contracko helps

Contracko's AI review extracts SLA targets and credit tiers from your service contracts and flags clauses that lack a defined measurement method or a termination trigger for chronic failure. Upcoming measurement-window review dates and credit calculation deadlines can be tracked as contract milestones with automated reminders, keeping operations and finance aligned without manual diary entries.

## Legal references

- [BW 6:74 Damages for non-performance Dutch law](https://wetten.overheid.nl/BWBR0005289)
- [BW 6:248 Reasonableness and fairness Dutch law](https://wetten.overheid.nl/BWBR0005289)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Software & SaaS](https://contracko.com/industries/software-saas)[B2B SaaS Companies](https://contracko.com/industries/b2b-saas)[Managed Service Providers](https://contracko.com/industries/managed-service-providers)[IT Services](https://contracko.com/industries/it-services)[Telecommunications](https://contracko.com/industries/telecommunications)

## Related clauses

- [Warranties Clause](https://contracko.com/clause-library/warranties)
- [Limitation of Liability Clause](https://contracko.com/clause-library/limitation-of-liability)
- [Liquidated Damages Clause](https://contracko.com/clause-library/liquidated-damages)

## Related terms

- [Service level agreement (SLA)](https://contracko.com/glossary/sla)
- [Warranty](https://contracko.com/glossary/warranty)
- [Breach of contract](https://contracko.com/glossary/breach-of-contract)

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## Frequently asked questions

Common questions about this clause.

- **Q:** Are service credits a customer's only remedy under an SLA?
  **A:** Often yes. Providers usually draft credits as the exclusive remedy, so customers should negotiate a termination right for chronic failure.

- **Q:** How is uptime measured?
  **A:** Per the agreed window (usually monthly) excluding planned maintenance; the measurement method must be defined or the metric is unenforceable.

- **Q:** What is a typical uptime target in a SaaS SLA?
  **A:** Most SaaS providers offer 99.9% monthly uptime ("three nines"), which allows about 44 minutes of downtime per month; mission-critical services may require 99.95% or higher.

- **Q:** Can a customer terminate if the provider repeatedly misses SLA targets?
  **A:** Only if the SLA includes a chronic-failure termination right. Without it, the customer is typically limited to service credits regardless of how often targets are missed.

- **Q:** Who bears the burden of proving an SLA breach?
  **A:** Usually the customer, unless the SLA places a reporting duty on the provider. Agreeing on a shared monitoring tool or provider-generated reports avoids later factual disputes.

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