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How do I cap SLA penalties in an agency contract?

Contract demands 2-hour response 24/7 with fee penalties? Cap penalties, define business hours and exclude force majeure. Copy-paste clause.

The risky clause

Subcontractor must respond to all requests within 2 hours, 24/7. Each missed SLA incurs a penalty of 10 percent of the monthly fee.

Why it is dangerous

Round-the-clock response with percentage penalties can cost more than you earn. Define business hours, severity levels, realistic response times and a total monthly cap on credits. Make credits the only remedy for missed SLAs. This is general information, not legal advice.

Safer clause to propose

Response times apply during business hours [HOURS]. Critical issues get a 4-hour response. SLA credits are capped at 10% of the monthly fee and are the sole remedy for missed targets.

Message to send

Hi [Agency],

Could the SLA cover business hours with severity levels, and cap total monthly credits at 10% as the sole remedy? A 24/7 two-hour target is not workable at this fee. Thanks, [Your Name]

Frequently asked questions

What is an SLA credit?

A discount given when a service level is missed, instead of a fine.

Should SLAs be 24/7?

Only with a matching fee and on-call arrangements.

Related guides

• Am I liable if AWS or a third-party API goes down?
• How do I stop endless approvals in an agency project?
• How do I handle changing requirements in an agency project?
• When should IP transfer to the agency?
• Should my liability match the agency's client contract?

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