Service level agreement

Before entering into a service-level agreement, it is important that both parties fully understand a service level agreement definition. Doing so means that both sides enter into the contract understanding the implications of what the service-level agreement has on their future business relationship.

What is a service level agreement?

A service level agreement (SLA) defines the relationship between one party and the contractual party. The service provider agrees to provide the specified service to the contractual party in exchange for compensation or payment. A service provider can use a service level agreement or contract when they plan to perform services for clients. Using a contract means protecting their own interests and ensuring that they are compensated or rewarded appropriately for that service. 

How does a service level agreement work?

A service level agreement works by including several conditions and criteria that need to be met by both sides. Any good service level agreement example will include the customer and service provider information. Additionally, it needs to deal with the scope of the services involved as well as the timeframe in which that service needs to be provided. Then, the agreement should outline what the payment terms are as well as the payment schedule. I.e., should the customer pay all upfront, or should they pay half at the start of the contract and the rest at completion? 

Importantly, it needs to include details on the ownership of materials involved and how the two parties want to deal with them throughout and after the contract has ended. Finally, it lays out what can occur if the targets set out in the rest of the agreement are not met. That could mean that the client does not have to pay the entire bill, or it could mean that the service provider has to make good on their guarantee in the contract - or else they will be legally liable for any losses incurred by the client. 

Advantages of a service level agreement 

The main advantage of service level agreements is that both parties are afforded protection on either side through the assurances and provisions included within them. On the service provider's side, the contract will detail how much and when they are paid. Thus, the service level agreement ensures that they are paid for their time and effort. 

When it comes to the client, they can agree upon terms about when payment is due and why. The why is important because it ensures that the services are provided to a required level to get what they believe is correct. 

Above all, it means that a business relationship or transaction is entered into that may not have transpired at all without the assurances and comfort that a legally binding service-level agreement provides. 

Contractbook and service level agreement

Contractbook has a service level agreement template within its vast contract template library. It means that anyone looking to establish a service level agreement with another party can do so quickly and easily. The result is that the actual work can begin far sooner than if a contract was drawn up from scratch. Additionally, the software that Contracbook uses means that both sides of the agreement can collaborate and negotiate the terms of the agreement efficiently - without time inefficient communication that emailing and snail mailing contracts can create.

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Tame your chaos with a central place to store and manage contracts, so you can analyze, decide and act quicker.