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Service Level Agreements - when do I need one?

View profile for Shaun Owen
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A Service Level Agreement (or SLA) is an agreement between two businesses which regulates and confirms the terms of the underlying contractual relationship between those two parties.

SLAs are also referred to as Framework Agreements or Master Services Agreements (MSA)

They are particularly useful where there is an ongoing relationship between the parties which is expected to last for several months or years or where there is anticipated to be a series of separate future purchases of goods or services.

What are the advantages of an SLA?

The advantages of an SLA are as follows:

  • It saves the need to supply terms and conditions with every quote given to the customer as the parties have previously agreed the terms which apply to any individual purchase order
  • Avoids the battle of the forms
  • It avoids any argument as to when an order becomes binding.

What matters can be regulated by an SLA?

The following matters are commonly regulated by an SLA:

  • Agreed standards of service
  • When the purchase order becomes binding on the parties
  • Deposits and their refund (or not?)
  • Delivery of goods or materials
  • When the risk for the goods or materials passes to the customer
  • Acceptance of goods or materials
  • Changes in pricing and the time that quotes remain valid
  • The need to amend the cost price of goods or materials supplied e.g. where there has been an increase in the base cost of the goods or materials
  • Cancellation rights
  • Ownership of intellectual property rights
  • Dealing with when time is of the essence of a supply
  • Regulating any applicable manufacturer or supplier guarantees
  • Retention of title
  • Limitation of liability of the parties
  • Termination of the relationship
  • Confidentiality
  • Sub-contracting rights

Why choose an SLA over reliance on my standard terms and conditions?

In most cases standard terms and conditions are likely to be sufficient, however the SLA should be considered where:

  • It is anticipated that there will be a significant level of repeat business between two businesses
  • Where the supplier is likely to be dealing with different companies within a group or where there are different individuals responsible for purchasing within the buying organisation
  • Where higher value goods are expected to be sold

An SLA can help reduce the administration involved where the first two examples apply.

When should I not rely on an SLA?

Where there is an individual or bespoke nature to a particular supply, which calls for specific or unique/specialist services. This is likely best dealt with by way of a stand-alone agreement.

How can we at Talbots Law help?

Our team of Corporate & Commercial Lawyers will advise you on whether an SLA is suitable for your needs and draft the document if you do.  Alternatively you may be faced with a contract which our solicitors will help you negotiate with the other contracting party, we have secured changes which are beneficial to our clients even where the “other side” present the contract as being non-negotiable.  

Contact our team on 0800 118 1500 or email Corporate Commercial directly to find out how we can help you.