What is an SLA?
Service Level agreement is a contract between two parties. One party is the customer or client and the other party is the service provider. This agreement states the various details of the transaction and it will describe what the parties are responsible for. A service-level agreement (SLA) defines the level of service you expect from a vendor, laying out the metrics such as measure of service, as well as remedies or penalties should agreed-on service levels not be achieved.
Usually, SLAs are between companies and external suppliers, but they may also be between two departments within a company. The purpose of this agreement to to ensure that the parties have a clear understanding about the level of service that will be provided.
People also refer to a service level agreement as Consulting Services Agreement, General Service Contract, Independent Contractor Agreement, Master Service Agreement (MSA).
While Service Agreements simplify the process for resolving disputes, they also prevent many disputes from arising in the first place. They do this by forcing the parties to discuss and record the key elements of the arrangement up front which is why it is pertinent to enter into a written service agreement.
Applicable Law
The principles of contract under Contract Act, 1872 would govern these agreements. Further, the Consumer Protection Act, 1986, also applies to all goods and services, excluding goods for resale or for commercial purpose and services rendered free of charge and under a contract for personal service. It protects rights of customers such as right to be informed, right to safety etc.
Goods and Services Tax (GST) is applicable on supply of services at different rates for different categories of services other than a few services which are exempt.
Advantages of Service Level Agreement
- Legal Binding: The SLA is legally binding making the parties follow the requirements laid in the SLA in all their future dealings.
- Avoids Confusion: The agreement also clearly describes terms in which future contracts should be made.
- Evidence: Furthermore, the agreement made is evidence to prove the level of service guaranteed
- Covers The Entire Relationship: The SLA covers the entire relationship between service provider and customer, covering all aspects of the contract that are likely to arise. Such an agreement is beneficial to have in place before starting a long-term relationship.
- Saves Time: It provides a framework to quickly negotiate agreements. Therefore, the same terms need not be repetitively negotiated for deals that are very similar to each other.
Kinds of Service Level Agreement
The different kinds of Service Level Agreement for a business include the following:
- Customer-specific SLA: The SLA between an individual customer and a service provider that only regulates the service level between them.
- Service-based SLA: When the agreement is between multiple customers and one service provider.
- Multi-level SLA: When the agreement is between one service provider and different levels of users such as the business, its employees and its customers.
Key Contents Of Service Level Agreement (SLA)
A well-drafted Service Level Agreement (SLA) must include the following key provisions in order to protect both the service provider and the business from any legal harms:
- Basic details of the parties.
- Purpose of the Service Level Agreement (SLA).
- The services to be delivered by the service provider.
- Responsibilities of the business i.e. the customer.
- Liabilities of the service provider regarding the manner in which the services must be provided.
- Security measures in place to keep the integrity of any data/information shared.
- The reporting mechanism to inform the business about the service standards.
- The payment mode in which the service provider will be paid.
- The duration for which the services would be provided.
- Any warranties or guarantees provided by the service provider.
- Termination of the contract.
- Remedies in case of breach of contract.
- The laws and jurisdiction applicable.
FAQs
The purpose of SLA is to ensure a minimum level of service to be provided to a user and thereby meet the expectation of the user.
It is important as it gives clarity to the parties regarding the service provided and it shall act evidence to prove the level of service guaranteed by the provider.
A SLA is like any other contract. You can exercise your legal rights and take legal action on the other party.
Hey @HarshitShah
Yes. Any time the terms of the agreement change, this should be documented in a new contract. The new contract should also make clear this contract replaces the old contract.