What Kinds of Contracts Are Considered SLAs?

A business relationship can become complicated when one party depends on another to deliver services consistently. The provider may have its own processes and limitations, while the client may have particular expectations concerning the quality and reliability of the service. These expectations often need to be addressed as part of the contractual relationship.

A service level agreement can be relevant in this context, particularly where consistent high performance is an important part of the commercial relationship.

What Is a Service Level Agreement?

A service level agreement is a contractual arrangement between a service provider and a client that establishes expectations for service delivery, including performance standards and legal accountability. In other words, an SLA gives the parties a common framework for understanding their engagement.

What Kind of Contracts Can Be Considered SLAs?

There is no single industry or contract type that automatically makes an agreement an SLA. Rather, several types of contracts can contain or function as SLAs if they correspond with the above definition.

Here are some instances:

SaaS Service Level Agreements

Software providers may use SLAs to establish performance commitments for applications supplied to customers. These may include uptime targets, availability standards, technical support, incident response, maintenance arrangements, and remedies for service interruptions.

Cloud and Web Hosting Service Level Agreements

Cloud providers and web hosting companies can use SLAs to establish availability and support standards. For example, the agreement could specify uptime percentages, planned maintenance procedures, incident response times, service restoration targets, and compensation or service credits where applicable.

Telecommunications  Service Level Agreements

Various telecommunications arrangements can also incorporate SLA provisions. A business obtaining internet connectivity, network services, communications infrastructure, or similar services may, for example, require commitments regarding availability, fault response, restoration times, and technical support.

Outsourced Business Services

Businesses outsourcing recurring functions can also use SLAs to establish measurable standards. Depending on the service, these may cover turnaround times, availability, response periods, accuracy rates, reporting, or escalation procedures.

Merchant Services Agreements

Merchant services agreements (MSAs) are contracts between a payment company and a business that allow the provider to collect or process payments on the business's behalf. They are also commonly called payment processing agreements or merchant agreements.

Within such an arrangement, an SLA can operate as a separate schedule or appendix dealing specifically with service performance. For example, it may establish support hours, escalation contacts, response targets, and resolution targets based on different priority levels.

This illustrates an important point: an SLA does not always have to be the entire contract. It can also be one component of a larger commercial agreement.

Consulting and Other Professional Service Level Agreements

An SLA is not limited to technology. Consulting, accounting, marketing, business advisory, engineering, facilities management, and other professional services can incorporate service-level commitments where the client requires measurable standards and other SLA attributes.

For example, an agreement may establish response times for client requests, reporting deadlines, project milestones, availability of assigned personnel, or turnaround times for specified services.

What Should an SLA Contract Include?

The contents will depend on a number of variables such as service nature, compliance requirements, and the parties involved. However, the following are some provisions an SLA contract can include:

Parties and definitions: Identify the client and service provider and define important terms used throughout the agreement.

Scope of services: Describe precisely what the provider is expected to deliver and what falls outside the agreed scope.

Service levels and performance standards: Establish measurable targets such as uptime, availability, response times, resolution times, delivery deadlines, or other key performance indicators.

Support and escalation: State support hours, communication channels, escalation contacts, incident priorities, and procedures for handling serious service problems.

Reporting and monitoring: Explain how performance will be measured, reported, reviewed, and documented.

Service credits or other remedies: Where appropriate, establish what happens if the provider fails to meet agreed service levels. Service credits are one possible remedy for missed targets.

Client responsibilities: State what the client must provide or do for the provider to deliver the services effectively. This may include information, access, approvals, cooperation, or timely payment.

Fees and payment: Address pricing, invoicing, payment dates, currency, and applicable taxes where relevant.

Confidentiality and data protection: Protect confidential information and establish appropriate requirements for handling personal or sensitive data. For example, this SLA template for Nigeria acknowledges requirements for data protection under the Nigeria Data Protection Act (NDPA). 

Intellectual property: Clarify ownership of existing intellectual property and new materials or deliverables created during the engagement.

Security: Where the services involve systems, financial information, or sensitive data, address applicable security obligations and incident procedures.

Force majeure: Explain how events outside a party's reasonable control affect performance obligations.

Liability and indemnification: Establish the parties' respective liability and any applicable exclusions, indemnities, or liability caps.

Term, renewal, and termination: State how long the agreement lasts, whether it renews, and the circumstances in which either party can terminate it. Termination may include termination for material breach, termination for convenience, or other specified events.

Dispute resolution and governing law: Establish how disputes will be handled and which jurisdiction's laws govern the agreement.

Notices and general provisions: Include appropriate provisions dealing with notices, amendments, assignment, severability, entire agreement, and other standard contractual matters.

Signatures: Provide appropriate signature blocks for the authorised representatives of the parties.

Conclusion

Contracts can be considered SLAs when they establish specific standards against which continuing service delivery can be assessed.

An SLA contract is not restricted to one particular industry or type of service. IT support, SaaS, cloud hosting, telecommunications, consulting, maintenance, outsourcing, merchant services and other fields can all involve SLA arrangements where measurable performance commitments are required. An SLA may also be a standalone contract or an appendix to a wider agreement.

The most effective arrangements clearly state the services covered, expected performance standards, and relevant legal clauses, among others.

For businesses that need a starting point, an adaptable template can make the drafting process more structured. Such templates should cover several essential areas while also providing guided customization for client-specific needs.

Explore Docuzina service level agreement templates.