What Does a SaaS SLA Actually Guarantee? Uptime, Credits, and Remedies
What This Clause Does
An SLA is the vendor's measurable commitment to reliability. It typically specifies a monthly uptime percentage (99.9% is common, which allows about 43 minutes of downtime per month), how uptime is calculated, and what remedies you get if the vendor misses the target.
The remedies are the key part. Many SLAs offer service credits (discounts on future invoices) when they miss targets. Service credits are often small (10-25% of one month's fee) and require you to file a claim within a narrow window. If your business depends on the service, credits may be insufficient. Negotiate for the right to terminate if the vendor misses SLA targets repeatedly.
Example Clause Pattern
"Vendor shall use commercially reasonable efforts to ensure the Service is available 99.9% of the time in any given calendar month, excluding scheduled maintenance. If Vendor fails to meet this commitment, Customer shall be entitled to a service credit of [10-25%] of the monthly fee."
What to Watch
- Uptime measured from vendor's systems, not your actual experience
- Scheduled maintenance windows excluded and can be called at any time
- Credits require you to file a claim: outages are not automatically credited
- No right to terminate after repeated SLA failures
How This Clause Works by Jurisdiction
California courts treat SLA service credits as contractual remedies that may constitute liquidated damages. Under California Civil Code §1671, liquidated damages must represent a reasonable estimate of actual harm at the time of contracting. Extremely low credits (e.g., 5% of one month's fee for total outages) risk being voided as unconscionable in consumer or small-business SaaS contexts.
Reviewed May 2026
New York courts enforce SLA service credit provisions as agreed contractual remedies treated as liquidated damages. Courts uphold credits as low as 10% of monthly fees between sophisticated commercial parties where actual harm would be difficult to quantify precisely, as is typical with SaaS downtime claims.
Reviewed May 2026
SLA credits in UK commercial contracts are enforceable as agreed remedies provided they are not penalties. Following Cavendish Square v. Makdessi (2015), a credit clause is valid if it protects a legitimate business interest and is not out of all proportion to that interest. Very low credits relative to actual loss may still survive if the parties are equally sophisticated.
Reviewed May 2026
Jurisdiction-specific information is general in nature and not legal advice. See disclaimer.
Found in These Contracts
This clause commonly appears in the following contract types:
Negotiation Strategies
Negotiate a termination right after two or more consecutive SLA breaches
Ensure scheduled maintenance windows are pre-announced with at least 48 hours notice
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