Reviewing a service level agreement and service credits

A service level agreement turns a promise of good service into numbers: availability, response times, resolution times, measured over a period, with a credit against the charges when they are missed. The numbers are only as good as the measurement and the exclusions, and the credits are only as good as what they leave the customer free to do. A regime that gives credits as the sole remedy can protect a supplier from the losses a failure causes; one with no cap can cost a supplier its margin for the period. I review the schedule from whichever side instructs me and return it marked up with a written explanation of what the levels measure, what the credits are worth, and the changes the other side will accept, for a fixed fee of £495 in three working days.

Who this is for

Suppliers of SaaS, hosting, managed IT, telecoms, facilities, logistics and other services in England and Wales drafting or accepting service levels, and customers relying on them, whether the service level agreement is a schedule to a master agreement or the supplier's published policy. Both parties are businesses.

What to look for in a service level agreement and service credits

The levels: what is measured, over what period, and by whom

Each service level should state the metric, the target, the measurement period, the measurement method and the source of the data, and the review checks each: availability measured monthly from the supplier's monitoring, response time from ticket creation during support hours, resolution time by severity with severity defined. It asks for the customer to receive the measurement data and reports, for a right to challenge a measurement, and for the levels to measure what the customer experiences rather than what the supplier's systems record.

The exclusions that empty a service level

Service levels exclude planned maintenance, emergency maintenance, the customer's own failures, third-party failures, force majeure and 'events outside the supplier's reasonable control', and each exclusion removes a period from the measurement. The review checks the exclusions against the service, asks for planned maintenance to be limited in hours and notified in advance outside business hours, for emergency maintenance to count unless caused by the customer, and for third-party failures to be excluded only where the third party is one the customer chose.

The credits: worth, cap and how they are claimed

A service credit is a percentage of the monthly charge for each level missed, capped at a percentage of the charge, and often payable only if claimed within a period. The review checks the arithmetic against the charges, asks for credits to be applied without a claim, for the cap to leave a credit that is worth having, and for credits to escalate where a level is missed in consecutive months. Because a credit is a pre-agreed sum payable on breach, it is subject to the rule in Cavendish Square Holding BV v Makdessi [2015] UKSC 67, but a credit that reflects the reduced value of the service is not a penalty, and the review keeps it there.

Sole remedy, and what the customer gives up

Suppliers draft credits as the customer's sole and exclusive remedy for a service level failure, which removes the customer's right to damages for the loss the failure caused. The review checks whether the sole remedy provision applies to all failures or only to those within the credit regime, whether it survives a persistent or catastrophic failure, and whether it is reasonable under section 3 of the Unfair Contract Terms Act 1977 where the supplier's standard terms are used, since a clause that lets a supplier fail repeatedly at the cost of a small credit may not be. For a supplier it drafts the sole remedy to cover ordinary failures and to yield to termination for persistent ones.

Escalation: from credits to termination

A service level agreement should provide an escalation path: a credit for a single miss, a remediation plan for repeated misses, a right to terminate for persistent failure defined by the number of misses in a period or a failure below a critical level, and a right to terminate immediately for a failure that stops the customer's business. The review adds the path where it is missing, defines persistent failure in numbers, and checks that termination for service failure carries the exit assistance the customer will need.

Reporting, review and changing the levels

The schedule should require monthly reporting against every level, a review meeting, and a procedure for changing levels when the service changes, and the review checks that the supplier cannot change the levels unilaterally, that the customer's own obligations, which the supplier's performance depends on, are stated, and that credits are set off against invoices with the Late Payment of Commercial Debts (Interest) Act 1998 continuing to apply to the balance. Where the service is a communications service, the general conditions Ofcom sets under section 45 of the Communications Act 2003 may require compensation the schedule cannot cut down.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The credits are capped at ten per cent of the monthly fee. Is that worth anything?

It depends what the cap protects the supplier from and what else you can do. The review checks the arithmetic, asks for credits that escalate for repeated misses, and adds a right to terminate for persistent failure so that the cap is not the end of your remedies.

The supplier says service credits are our sole remedy. Does that mean we cannot claim our losses?

As drafted, for service level failures, yes. The review checks whether the sole remedy applies to every failure or only ordinary ones, whether it is reasonable on the supplier's standard terms, and asks for it to yield to damages and termination where a failure is persistent or catastrophic.

Are service credits a penalty?

Not where they reflect the reduced value of the service the customer received, which is the way the review drafts them. A credit out of all proportion to the supplier's failure could be challenged, and a supplier's credit regime should be set at levels that stay on the right side of that line.

Related guidance and services

• Contract review, £495, the service this page describes
• SaaS and technology contracts, £995
• Reviewing a cloud hosting agreement
• Reviewing a step-in rights clause

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.