A client's procurement team has just sent back your draft agreement with one question: what happens if the platform goes down? You have been selling your services on reliability for years, and now a prospective customer wants that promise in writing, with a remedy attached. Whether you run a managed IT business, a web host or a software-as-a-service product, this is the moment a sales conversation becomes a legal commitment. The structure you choose will determine how much a single outage costs you, and a poorly designed service level schedule can do more damage than the failure it is meant to regulate.
The question is really two questions. First, whether to make service level promises at all. Second, what the customer gets if you miss one. On the first, you have three realistic positions: leave service levels out of the agreement entirely; include them as promises with no agreed remedy; or include them with a remedy attached. On the second, the main remedies are service credits, a right to terminate, or both, and the drafting choices inside each matter more than the headline percentage.
One assumption needs flagging before you weigh anything else. Many providers think they can avoid the whole issue by saying nothing in the contract, or by adding "best efforts" to everything. Neither fully protects you. What you say in marketing material and sales meetings is itself capable of being relied on as a representation under the Australian Consumer Law, so a gap between what you sell and what the contract promises can expose you to more than a clean, achievable commitment ever would.
The options in front of you
The realistic menu is narrower than most providers assume. "No service levels" and "service levels as unenforceable promises" look different but often collapse into the same outcome, because a customer who suffers loss from a missed target can still sue for breach of contract or damages under the consumer protection provisions. What actually differs between your options is the agreed remedy: nothing, credits against future invoices, a right to exit, or a combination. The decision, in other words, is less "will I promise uptime?" and more "what does the customer get when I miss a target, and how do I cap that exposure?"
Factors that should drive the decision
What your marketing has already promised
Start with an audit of your website, proposal templates and sales decks, because you may already be bound. Under s 18 of the Competition and Consumer Act 2010 (Cth) (CCA), Schedule 2 of which contains the Australian Consumer Law (ACL), you must not engage in conduct that is misleading or deceptive in trade or commerce. A page that says your service is available "99.9% of the time" is a representation a customer can rely on, whether or not it ever reaches the agreement.
The sharper exposure is s 29(1)(b) of the ACL, which makes it an offence to falsely represent that services are of a particular standard, quality, value or grade, and which carries pecuniary penalties under s 224 of the ACL. If you tell a customer your support team responds within two hours and you have no intention or capacity to do so, that is not a drafting problem, it is a regulator problem. The practical rule is simple: the number you quote in a sales meeting should be the number your contract delivers, or you should qualify it before it leaves your mouth.
How much your customers depend on the service
The more central the service is to a customer's operations, the more they will push for service levels and remedies, and the more reasonable that push is. A few signals to weigh:
- Mission-critical services: e-commerce hosting, payment processing, point of sale systems and core accounting platforms. Customers here will expect a commitment in writing and will often walk away without one, because a day of downtime costs them revenue directly.
- Supporting services: backup storage, reporting tools, analytics and occasional-use applications. Customers rarely demand service levels for these, and offering them binds you without buying you anything.
- Enterprise customers: procurement teams treat a service level schedule as a standard annexure and will negotiate it line by line. Smaller customers usually accept a one-page commitment or none at all.
If you operate across both ends of this spectrum, a single standard form agreement with one service level schedule rarely fits. Providers who only serve occasional-use customers can reasonably offer no service levels at all, and should, because an unnecessary promise is just a future breach waiting to happen.
Who your customer is
Australian consumer protection law reaches into contracts that many IT providers assume are purely commercial. The ACL's consumer guarantees apply whenever you supply services to a consumer, which includes any service priced at $100,000 or less or ordinarily acquired for personal, domestic or household use (s 3 of the ACL). The services must be rendered with due care and skill (s 60 of the ACL), and you cannot contract out of that (s 64 of the ACL). If you sell subscriptions to sole traders and small teams, much of your book is consumer-facing for these purposes.
For business customers, s 64A of the ACL lets you limit liability for a failure to comply with a guarantee to re-supplying the service or paying the cost of re-supply, but only where the term is fair and reasonable. That is the only statutory escape hatch, and it does not touch the guarantee of due care and skill in a consumer supply.
There is a second layer for customers who are small businesses. A contract is a "small business contract" if a party to it employs fewer than 100 people or has turnover under $10 million (s 23(4) of the ACL). Under ss 23 and 24 of the ACL, a term of a standard form small business contract is void if it causes a significant imbalance in the parties' rights, is not reasonably necessary to protect your legitimate interests, and causes detriment to the customer. Since the 2023 reforms, proposing or relying on such a term is itself a contravention attracting penalties of up to $100 million for a body corporate, three times the benefit obtained, or 30% of adjusted turnover (s 224 of the ACL). A service credit scheme that is pure window dressing, a cap that strips out every real remedy, or a unilateral right to change the service levels are the kinds of terms that get scrutinised under this regime.
How you will measure the promise
The most common service levels in the IT industry are uptime and response or resolution time, and each needs to be defined precisely enough that both sides can tell when it has been met.
- Uptime: a percentage of availability over a defined period, for example 99.8% in each calendar month. You need to specify what counts as downtime, how it is measured, and who measures it. A number with no measurement method is a promise that cannot be verified, which makes every dispute harder.
- Response and resolution: how quickly you acknowledge a support request and how quickly you fix it. These are usually tiered by priority, so that an outage stopping a customer from trading attracts a faster response than a request to change a user's access level. Specify business hours versus around-the-clock cover, or a promise of "one business day" will be argued over what a business day means.
Just as important is what does not count against you. Service level schedules should exclude:
- scheduled maintenance that you have notified the customer about in advance;
- failures caused by third parties, such as your own hosting provider or a telecommunications carrier;
- events outside your reasonable control, such as natural disasters or major infrastructure failures;
- failures caused by the customer's own systems, configuration or misuse.
A qualifier like "commercially reasonable efforts" can convert an absolute guarantee of outcome into an obligation to take reasonable steps. It is a genuine risk-reduction tool, but it is not a get-out-of-jail card: the question of what was commercially reasonable in the circumstances can still be litigated, and regulators still read your marketing.
Which remedy fits which failure
Once you have chosen your service levels, you need to decide what the customer gets when you miss them. The realistic structures are:
- Service credits: credits against future invoices, usually graded so that a more serious or prolonged failure produces a bigger credit. To contain exposure, credit schemes typically include a threshold (credits only accrue after a target is missed twice in a month), a cap (for example, 20% of the monthly fee), and exclusions for events outside your control. Credits are the middle path: they give the customer a genuine remedy without exposing you to damages for every minor miss.
- A right to terminate: lets the customer exit early, and possibly claim a refund, if the failure is serious enough. Reserve it for material and repeated failures, such as sustained outages, rather than any miss of a target. Some customers want an exit more than a discount, and offering termination can replace a credit scheme entirely.
- Both, with credits as the sole monetary remedy: a common structure gives credits for routine misses and a termination right for material failures, while stating that credits are the customer's only monetary recourse and that any credits already paid are deducted from any damages a court later awards. This prevents double recovery, which is the main risk of combining remedies.
Whichever you choose, the schedule must say what happens on a miss, because that is the clause a customer's lawyer will read first.
What a missed target actually costs you
Even the best credit scheme is not a complete shield. If the service level is a term of the contract, a breach gives the customer a claim for damages measured by their loss, and a clause that says credits are the sole remedy is an exclusion clause, which courts construe strictly against the party relying on it. A badly drafted cap can also be challenged as an unfair term in a small business contract, as discussed above, or as ineffective against the ACL's non-excludable guarantees.
So price in the realistic downside before you commit to a number. Ask what your actual availability and response performance has been over the past year, what a month of missed targets would cost in credits at your proposed cap, and whether the measurement and exclusion drafting would survive a customer who has just lost a day of trading. If you cannot answer those questions, you are not ready to sign the schedule, and a lawyer should help you work through them before you do.
Getting the service level schedule right with Artificer Legal
The drafting choices here are where an Artificer Legal IT lawyer earns their fee. We start by auditing what you already promise in your marketing and proposal materials, and stress-test the numbers you are proposing against how your service actually performs. We then model the downside of each remedy structure, so you can see what a bad month looks like in dollars before you commit to it, and we draft the service level schedule, credit mechanics, exclusions, caps and termination rights so they comply with the ACL's unfair contract terms and consumer guarantee provisions. Where an enterprise customer's procurement team is pushing back, we negotiate the schedule on your behalf. The goal is an agreement where the marketing, the contract and the measurement method all tell the same story, so the promise you make in the sales meeting is the promise you can keep.
The promise that survives the sales call
The percentage in the schedule is not the hard part. The hard part is the measurement, the exclusions and the remedy structure, because that is where a missed target becomes either a small credit on next month's invoice or a damages claim, a regulator inquiry or a lost customer. The providers who get this wrong are the ones who sell "99.9% uptime" in a sales deck and draft "best efforts" in the contract, leaving the customer to enforce a promise nobody agreed how to measure. Treat the service level you quote as a promise that will be held to, and design the contract around that reality before you send it.
For most IT providers the decision is not whether to offer service levels, but which of your customers need them and what each customer gets when you miss. Marketing claims already bind you under the misleading conduct and false representation provisions of the ACL, consumer guarantees protect customers you may not have classified as consumers, and unfair contract terms in standard form small business agreements now attract penalties. Uptime and response targets need precise measurement and sensible exclusions, and service credits, termination rights or a combination of both need thresholds, caps and an exclusive remedy clause drafted so the customer cannot be paid twice. None of this is beyond a good commercial lawyer, but all of it is beyond a paste-and-update template.