Contract Glossary
Service Level Agreement (SLA)
Definition
A service level agreement defines the measurable performance standards a service provider commits to meeting. It spells out uptime guarantees, response times, resolution deadlines, and what happens (usually service credits or penalty payments) when those standards are not met. SLAs turn vague promises into enforceable commitments.
In Practice
A SaaS company promises 99.9% monthly uptime in its SLA. That means no more than 43 minutes of downtime per month. If the service drops below that threshold, the customer gets a 10% service credit on next month's bill. Below 99.5%, the credit increases to 25%. The SLA also specifies that scheduled maintenance windows don't count as downtime, and that the customer must report outages within 72 hours to claim credits.
Example Clause
Provider guarantees a monthly Service Availability of 99.9% ('Uptime SLA'). 'Service Availability' is calculated as: (Total Minutes in Month - Unplanned Downtime Minutes) / Total Minutes in Month x 100. Scheduled maintenance performed during the designated maintenance window (Sundays 02:00-06:00 UTC) shall not be counted as Unplanned Downtime. If Provider fails to meet the Uptime SLA in any calendar month, Client shall be entitled to a service credit equal to 10% of the monthly fees for that month, applied to the next invoice.
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