SLAs: Remedies
Commercial Contract
Table of Contents:
Service Credits
Cash Penalties
Extension of Services
Termination for Breach
SLAs: Remedies
Service Credits
The parties may agree that a customer will be compensated for any service failures with credits to be applied against future payment obligations owed by the customer to the service provider.
In the following exemplars, the parties defer on specifying how the service credit is calculated:
Exemplar C67B-1
In the event that Licensor’s performance or provision of Services measured, or measurable, by the standards set forth in this Agreement do not meet the standards set forth in this Agreement, including any failure on the part of Licensor to perform its obligations pursuant to this Agreement in accordance with the terms and conditions set forth in this Agreement (a “Service Failure”), the remedy for such Service Failure will be in the form of a service credit issued by Licensor that may be used by Customer against the payment of amounts otherwise owed by Customer to Licensor under the Agreement. Specifically, a service credit is a dollar-based credit which Licensor shall credit back to Customer’s account according to a calculation to be agreed to by the parties in good faith provided however, that the total amount of such reimbursement shall not exceed the total amount paid to Licensor under this Agreement in the preceding 12-month period.
Exemplar C67B-2
Except as provided below, the service level agreements (SLAs) set forth in the applicable SOW are not met, a service credit will be issued by Supplier that will be added at the end of the applicable billing cycle to be applied against the payment of amounts otherwise owed by Buyer to Supplier at the end of that billing cycle. In the event this Agreement has been terminated or will terminate prior to the time during which the service credits would be fully utilized, Supplier shall issue Buyer a refund equal to the value of the unused service credits. The amount of service credits for each SLA will be set forth in the applicable SOW.
In the following example, the parties agree to calculate service credits on a monthly basis as a function of the number of down days (based on a 30-day month), subject to specified caps:
Exemplar C67B-3
The objective for Service Availability is at least 99.5%. For any month in which the objective is not met, Customer will receive a credit, which may be applied towards Customer’s subsequent Service invoices, equal to 1/30th of the monthly recurring charges for the affected Services (i.e., the portion(s) of the Services directly made unavailable as a result of the outage(s) in question) for each cumulative 24-hour period during which such Services are unavailable to Customer. The total credits payable for Service Availability objectives missed during anyone month period shall not exceed the total monthly recurring charges for the Services in that month. Furthermore, the total credits in any billing quarter shall not exceed the largest total monthly recurring charge for the Service in that quarter. Customer should anticipate receiving any applicable credit within two (2) billing cycles after the month in which the Service Availability objective was missed. The Invoice documentation from Provider shall show the Service Availability calculation together with a summary description of the reasons for any outages in the billed quarter, together with any applicable Service credits due from previous quarters. This shall be the sole remedy available to Customer for Service Availability.
In the following example, the parties to agree to calculate service credits as a percentage of fees owed:
Exemplar C67B-4
If the System Availability of a component of the System is below the Target Availability Levels set forth above (“Downtime Event”), Customer may submit a credit request to Supplier within thirty (30) days of such Downtime Event (“Service Credit Request”). In order to initiate a claim for a Service Credit (as defined below), Customer must submit a Service Credit Request in writing and provide sufficient details for Supplier to validate the Downtime Event, including: (a) Customer’s name and contact information; (b) the date and start/end time of the claimed outage(s); and (c) a brief description of the characteristics of the claimed outage(s). The Customer will be notified within ten (10) business days of the written Service Credit Request of the resolution of such Service Credit Request. If the Service Credit Request is rejected by Supplier, the response notification by Supplier will specify the basis for such rejection. If the Service Credit Request is approved by Supplier, Supplier will issue a Service Credit to Customer's account calculated as a percentage (“Weighting Factor”) of the total fees payable by Customer to Supplier during the Coverage Period in which the Downtime Event occurred. The Service Credit shall apply to the next invoice issued by Supplier or if no additional invoice will be issued then Supplier shall provide Customer with an extended subscription term proportional to the applicable Service Credit. These Service Credits are Customer’s sole remedy for any Downtime Events.
The Service Credits will be calculated using the Weighting Factors set forth in the table below:
Service Level Weighting Factor
Availability Less than 90% Availability 25%
90.0 - 96.9% Availability 15%
97.0% - 98.5% Availability 10%
98.6% - 99.95% Availability 5%
> 99.95% Availability 0%
Cash Penalties
Although not as common as issuing credits, a vendor may agree to pay a cash penalty for service failures:
Exemplar C67B-5
Supplier guarantees system uptime of 99.9%. The following financial remuneration will be provided, should unplanned downtime in the given month exceed Supplier’s uptime guarantee of 99.9% and shall be your sole and exclusive remedy for any Service level breach or other Service delivery failure.
Uptime % | Allowed unplanned downtime (mins) | Allowed unplanned downtime (mins) | Penalty % of License Fee | Penalty Amount per full current and paid User
>= 99.9% | 0 | 42 | 0% | $0
>= 99.8% | 43 | 86 | 12.5% | $5
>= 99.7% | 87 | 129 | 25% | $10
>= 99.6% | 130 | 172 | 37.5% | $15
< 99.6% | 173 | n | 50% | $20
1. Uptime targets are based on a 30-day month (30 days; 720 Hours; 43,200 minutes)
2. 99.9% uptime = 43 minutes or less of unplanned downtime
3. Financial penalty is based on Supplier license portion of overall monthly fee, which is $40/month per user.
4. Any financial remuneration will be provided to the client in the form of a credit which may be used against future renewal invoices.
5. Please note that the uptime guarantee excludes any Force Majeure events.
Extension of Services
Rather than issue credits to the customer to be applied to future payment obligations, the service provider could agree to extend the service subscription period at no additional cost:
Exemplar C67B-6
Contractor strives for a 100% Uptime. If Uptime falls below 99.9% in a given subscription month, Contractor will offer a free extension of Customer's subscription period of five (5) days per each subscription month during which Uptime fell below 99.9% ("Service Extension"). "Uptime" means the percentage of time in a subscription month that Contractor's management console and Contractor's API services are available for access, as measured by Contractor and can be seen on the Service's online status dashboard. Service Extension will not be awarded in the following circumstances: (a) circumstances beyond Contractor reasonable control, including but not limited to network issues outside of Contractor's control (including DNS and connectivity problems), war, terrorism, labor disturbance, interruption of telecommunications, failure of third party software or services, or acts of God; (b) acts or omissions by Customer or its users that are in breach of Subscription Agreement; (c) downtime for maintenance that has been advised to Customer at least 72 hours in advance; and (d) downtime resulting from individual periods of non-availability lasting less than five (5) minutes. To receive a Service Extension, Customer must submit a request by sending an e-mail message to: support@Contractor.com within ten business (10) days of the end of the subscription month with respect to which Customer claims the Service Extension. The request must include supporting documentation, such as log files showing the non-availability of the Service. This SLA is Customer's sole and exclusive remedy for any downtime experienced.
Termination for Breach
If the service failures are frequent enough to evidence a pattern of failure, the foregoing remedies may not suffice to make the customer whole. In the following exemplar, the parties agree that repeated or continued service failures will provide the customer the right to terminate for cause:
Exemplar C67B-7
Notwithstanding anything to the contrary in the Agreement that allows for a cure period in connection with any material breach of the Agreement, Licensor’s failure to meet the uptime commitment set forth in this Agreement shall be deemed a material breach of the Agreement that is not subject to such a cure period, and Customer, in its sole discretion, may terminate the Agreement by delivering written notice to Licensor upon the occurrence of any of the following circumstances: (a) Licensor’s failure to meet such uptime commitment for two consecutive months; or (b) Licensor’s failure to meet such uptime commitment for any three months during any rolling 12-month period. Further, Licensor’s failure to correct three or more Errors during any rolling 12-month period shall be deemed a material breach of the Agreement that is not subject to a cure period, and Customer, in its sole discretion, may terminate the Agreement by delivering written notice to Licensor upon the occurrence of such failures. For the avoidance of doubt, any termination of the Agreement by Customer due to Licensor’s failure to perform in accordance with the terms and conditions set forth in this Agreement shall be without any financial penalty to Customer and shall be without prejudice to any other rights and remedies available to Customer in the Agreement or under applicable law. Further, any amounts prepaid by Customer for Licensed Content or Services shall be refunded on a prorated basis up to the date of such termination.