Contract Management and Service Level Agreements: Protecting Your Business

Essential Contract Terms

Building customer agreements that protect you. **Core Sections** 1. Service Description - What exactly you provide - Features included/excluded - Example: "Cloud project management SaaS, including tasks, files, team messaging" 2. Payment Terms - Price (per user, per month, or flat) - Billing cycle (monthly, annual) - Payment method (credit card, invoice) - Late payment consequences (can suspend service) - Example: "£500/month, billed monthly via credit card, due on invoice date" 3. Term and Renewal - Contract length (1 year, month-to-month) - Auto-renewal (does it renew automatically?) - Renewal terms (do terms change?) - Example: "12-month initial term, auto-renews monthly thereafter unless 30-day notice" 4. Termination - How to end contract (email, written, 30-day notice) - Termination charges (early termination fee?) - Data after termination (30-day data export, then delete) - Example: "Either party can terminate with 30-day notice. No early termination fees for month-to-month." 5. Service Level Agreement (SLA) - Uptime guarantee (99.5%, 99.9%, etc) - Downtime credits if miss SLA - Exclusions (customer error, third-party issues, force majeure) - Example: "99.5% monthly uptime. If miss, customer gets 5% monthly fee credit." 6. Liability - What you're liable for (breach of SLA, data loss) - Cap on liability (typically 12 months fees) - Exclusions (consequential damages, lost profits) - Example: "Liability capped at 12 months of fees. Excludes consequential damages." 7. Data and Privacy - You will not access customer data - You will protect data (encryption, access controls) - You comply with GDPR, CCPA, etc - Example: "We protect customer data with encryption. Customer owns all data. You can export/delete anytime." 8. Warranties - What you guarantee (product works as described) - What you don't guarantee (perfect functionality, specific results) - Example: "We warrant product will operate substantially as described. We don't warrant specific business results."

Service Level Agreements (SLAs)

Setting performance guarantees and credits. **Uptime SLA** Uptime percentage: % of time service is available. Calculations: - 99.9% monthly = 43.2 minutes downtime allowed - 99.5% monthly = 21.6 minutes downtime allowed - 99.0% monthly = 7.2 hours downtime allowed What counts as downtime: - Service unavailable to customer (can't login, use features) - Not: Scheduled maintenance (often excluded) - Not: Customer error (not your responsibility) - Not: Third-party issues (payment provider down, not you) Measurement: - Automated monitoring (ping your service every minute) - External monitors (third-party confirming uptime) - Status page (public dashboard showing uptime, outages) Example calculation: - Month has 30 days × 24 hours = 720 hours = 43,200 minutes - 99.5% uptime = 99.5% × 43,200 = 42,912 minutes available - Downtime allowed = 43,200 - 42,912 = 288 minutes (4.8 hours) **SLA Credits** If you miss SLA, customer gets credit. Example structure: | Uptime | Credit | |--------|--------| | 99.0-99.5% | 5% of monthly fee | | 98.0-99.0% | 10% of monthly fee | | 95.0-98.0% | 25% of monthly fee | | <95.0% | 50% of monthly fee | Example: - Customer pays £1K/month - Month 1: 99.2% uptime (miss 99.5% target) - Credit: 5% × £1K = £50 credit (applied to next month) Automatic or request: - Automatic: Monitor tracks uptime, automatically applies credit - Request: Customer requests credit, you verify and apply Benefits: - Transparent: Clear what customers get if you underperform - Fair: Customers not penalized for your issues - Incentive: Drives you to maintain uptime **Response Time SLA** Alternative/additional: Response time guarantee. Example: - Support ticket SLA: Respond within 24 hours - Critical issue SLA: Respond within 1 hour - Resolution SLA: Resolve within 48 hours Measured: - First response time (how quickly you respond) - Time to resolution (how quickly you fix) Credits: - Miss SLA: 5-10% credit (applies to support/product tier)

Free — no card needed

See this in action for your business

AskBiz tracks these metrics automatically — just connect your data and start asking questions.

Liability and Risk Management

Protecting your company from legal exposure. **Limitation of Liability** Cap on liability: Maximum you could be liable for. Typical: - Cap at 12 months of customer fees - If customer pays £1K/month, max liability £12K - If sued, can't win more than this Rationale: - If customer lost £1M, can claim you owe £1M (unlimited exposure) - Cap protects you: You know max possible loss - Fair: Cap is 12x annual fee (reasonable multiple) Example clause: "Except for data breach or gross negligence, liability is capped at 12 months of fees paid." Exclusions from liability: - Consequential damages: Customer's lost revenue, lost profits - Indirect damages: Customer's customer lost business - Punitive damages: Punishment for wrongdoing Example: - You have 24-hour outage - Customer lost £500K in revenue (they were selling) - You liable: Cap of 12 months fees (£12K) - You NOT liable: Their lost profits (£500K), that's consequential **Indemnification** You defend customer against third-party claims. Example: - Customer sued for using your product - Customer claims you (product infringed someone's patent) - You agree to defend and pay legal fees Protections: - Only if claim is valid (you actually infringed) - Customer helps defense (cooperate, no settling without you) **Insurance** Protect against liability: - General liability: £1-5M coverage - Professional liability (E&O): £2-5M coverage - Cyber liability: £1-2M coverage - Cost: £5-50K annually (depends on size) Types covered: - General liability: Someone injured using your product - Professional liability: Sued for breach of contract, SLA failure - Cyber: Data breach, ransomware, security issues Worth it: If sued, insurance covers legal fees and settlement.

Managing Contracts

Operational aspects of contract management. **Contract Lifecycle** Negotiation: - Customer proposes (or you do) - Discuss terms (price, term, SLA, liability) - Iterate until agreement - Timeline: 2-8 weeks typical (enterprise longer) Signature: - Both parties sign (electronically or physical) - Start date specified (effective immediately or future date) - Payment starts per term Execution: - Provide service per contract - Monitor SLA compliance - Send invoices on schedule - Handle support requests Renewal: - 30-60 days before expiration, outreach - Negotiate renewal terms (price change, new features) - Get new signature - Continue service Termination: - Customer wants to cancel (per termination clause) - Notice period (30-day notice, etc) - Final payment (pro-rata if mid-month) - Data export and deletion (per agreement) **Contract Templates** Standard template for each customer type: - SMB SaaS: Standard terms, limited negotiation - Auto-renews monthly, can cancel anytime - 99.5% uptime SLA - Liability capped at 3 months fees - Mid-market: Some negotiation - 1-year terms, auto-renew - 99.9% uptime SLA - Custom liability cap (negotiate) - Enterprise: Heavy negotiation - Custom terms - Custom SLA (may request higher uptime) - Custom liability cap (often higher) Template: Reduces time to negotiation, starts with your ideal terms. **Contract Repository** Maintain central repository: - Signed contracts (all versions) - Renewal dates (calendar reminder for renewals) - Key dates (termination notice deadlines, renewal dates) - Custom terms (changes from standard) Tool: Contract management platform (Ironclad, DocuSign, etc) or shared drive. Benefit: - Find contract quickly - Don't miss renewal deadlines - Track special terms