Difference Between Service Level Agreement and Contract
A service level agreement, which is commonly referred to as an SLA, is used to define the relationship between a client and a service provider.3 min read updated on February 01, 2023
There is a difference between service level agreement and contract. A service level agreement, which is commonly referred to as an SLA, is used to define the relationship between a client and a service provider. Much of the time, it is used within the IT industry when IT companies provide services to their clients. In this type of situation, the IT company is referred to as an IT vendor.
What Does an SLA Cover?
The SLA goes into great detail and covers what services are going to be rendered by a certain entity and how they are to be provided. Any time there are goods to be rendered, an SLA should not be used. It is only meant to be used when an entity is acquiring services from a provider.
SLAs are, in theory, enforceable by a court of law. However, it should be noted that any legal processes involved in enforcing an SLA tend to be extremely lengthy and very costly. This is why, most of the time, a customer will choose not to enforce an SLA through a court of law. The more detailed an SLA is, the more likely it is to be enforced. When it lacks details, there's a good chance it won't be enforced.
Although an SLA does provide protection to both parties, it is meant to be used as a tool that can build a relationship between the two parties. It should never be viewed as a weapon that is to be used against one another.
Once a service level has been agreed upon an SLA needs to be created that outlines how the service is going to be performed and provided, as well as what is to happen if the company fails to provide the service. Much of the time there will be a section in the SLA that outlines how any disagreements are to be resolved between the two parties and not in a court of law. It may also state that certain credits are to be given to the customer if the company fails to provide the service they agree to.
What Types of Law Apply to SLAs?
Although an SLA is an agreement, it's actually a contract too. Because of this, contract law applies to SLAs. This law is mostly based on common law, such as case law. There have been numerous cases dealing with contract law, including those related to:
- Offer and acceptance
- Interpretation of contracts
- Concluding contracts by email
Even though contract law applies to SLAs, there are only a few Acts of Parliament that apply. If one of the parties involved in an SLA is a consumer, then the Consumer Protection Act will apply. This Act mandates that an SLA be written in a language that is very easy to understand by a consumer, meaning it should use understandable language. More so, it cannot include any type of prohibited clauses.
An SLA should be viewed as a contract that takes place between a service provider, this can take place either internally or externally, and an end user. The level of service is clearly explained in the SLA to ensure both parties understand what level of service is to be expected. These types of agreements are output-based, meaning that their entire purpose is to explain what the end user will receive from the service provider.
What Sections Are Included in an SLA?
There will likely be a section in the SLA that outlines how the service provided is to be measured. It will also include how any issues between the parties involved can be remedied. If there are any penalties associated with not providing the service, the SLA will outline them as well. Normally, an SLA explains an agreement that has been made between a company and an external entity. However, in some cases, they represent an agreement between two departments of the same company.
Most service providers will create some type of standard SLA, or multiple standard SLAs, that outline how their various services are to be provided to end users. These SLAs prove to be of the utmost value when negotiating prices for their services with clients. All SLAs should be reviewed on a regular basis and modified if necessary.
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