Negotiation and Drafting of Service Level Agreement – SLA Guide

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Negotiating and Drafting of Service Level
Agreements

• National Work Shop on Drafting of Commercial
  agreements
• New Delhi Organised by ASSOCHAM - 26th September,
  2013
• Presented by S. Ravi Shankar Advocate Supreme
  Court of India
• Partner Law Senate Law Firm

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Negotiating and Drafting of Service Level
Agreements

• Service Level Management is a Scientific Process
  of
• Managing Resources
• To ensure acceptable quality of Service
• At an acceptable Price
• In an acceptable time frame

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Negotiating and Drafting of Service Level
Agreements
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Negotiating and Drafting of Service Level
Agreements

• A Service Level Agreement is
• A Binding Agreement
• Negotiated and settled by Parties
• With clear obligations to perform
• To deliver the promised service quality

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Negotiating and Drafting of Service Level
Agreements
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Negotiating and Drafting of Service Level
Agreements

• SPECIAL FEATURES OF Service Level Agreements
• Service Description
• Service availability
• Acceptable Range of Service Quality
• Tolerance Limits of Service Quality
• Meaningful Metrics
• Monitoring System
• Rewards and Penalties

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Negotiating and Drafting of Service Level
Agreements

• Review Procedure
• Crisis Management
• Dispute Resolution

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Legal Challenges - SLAs

• Major Legal issues arise from
• Dispute Resolution mechanism
• Liquidated damages
• Penalties

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Dispute Resolution in SLAs
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Liquidated Damages
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Liquidated Damages

• Limitation of Liability
• The final liability of the service provider shall
  not exceed a sum equal to the contract Price or
  . (Amount), except for exceptions
  (Exceptions to be specified)
• Neither party shall be liable to the other for
  any direct or indirect damages

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Indian Contract Act,1872

• Section.73 Compensation for Loss or Damage
  caused by breach of Contract- When a contract
  has been broken, the party who suffers by such a
  breach is entitled to receive, from the party who
  has broken the contract, compensation for any
  loss or damage caused to him thereby, which
  naturally arose in the usual course of things
  from such breach, or which the parties knew, when
  they made the contract, to be likely to result
  from the breach of it.

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Indian Contract Act,1872

• Section 74Compensation for Breach of Contract
  When the contract was broken, if a sum is named
  in the contract as the amount to be paid in case
  of such breach, or if the contract contains
  any-other stipulation by way of penalty, the
  party complaining of the breach is entitled,
  whether or not actual damage or loss is proved to
  have been caused thereby, to receive from the
  party who has broken the contractreasonable
  compensation not exceeding the amount so named or
  as the case may be, the penalty stipulated for.

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Views of Courts of India ONGC Vs SAW Pipes
Ltd., (2003) 5SCC 705

• Terms of the contract has to be looked into
  before arriving at the conclusion whether the
  party claiming damages is entitled for the same.
• If the terms are clear and the estimate of
  damages/compensation is unreasonable or is by way
  of penalty, party who has committed the breach is
  required to pay such compensation
• Burden of Proof It is not necessary that in all
  cases the aggrieved party needs to prove the loss
  of damage suffered by them and the court is
  competent to award the reasonable compensation
  even if no actual damage is proved to have been
  suffered in consequence of the breach.

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Views of Courts of India BSNL Vs Reliance
Communication Ltd (2011)1SCC 390

• It is desirable to provide for liquidated damages
  in the Contract
• This is because liquidated damages reduce
  uncertainty and help in reducing litigation
• Terminology used for these damages, penal or
  liquidated is not the decisive factor though it
  is one of the factors to be taken into
  considerationwhile determining the real nature of
  these damages whether they are penal or
  liquidated

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