A Service Level Agreement Nepal is a contract document that defines measurable service performance standards, monitoring rules, and remedies if performance falls below agreed targets under Nepal’s commercial contract law Nepal principles. In outsourcing, managed services, and long-term vendor arrangements, an SLA converts operational expectations into enforceable obligations by specifying KPIs and performance metrics Nepal contract practice can measure, verify, and dispute in a structured way.
SLAs are critical in Nepal where many service relationships involve continuous delivery—IT managed services, telecom support, BPO operations, logistics, facilities management, security services, and cloud or data services. Without an SLA, parties often argue about what “timely,” “available,” or “acceptable performance” means, and disputes escalate when invoices are paid but outcomes are inconsistent.
Common SLA disputes in Nepal typically arise from:
Measurement disagreements (what counts as downtime, response, or resolution)
Downtime and delay events (planned maintenance vs unplanned outages)
Scope creep (new tasks added informally without revising KPIs or fees)
Weak documentation (no reporting cadence, no evidence standard, no audit trail)
Remedy ambiguity (credits mentioned but no claim process, caps, or thresholds)
An SLA is most effective when it is drafted as part of a coherent contract stack (MSA/SOW/SLA) and aligned to enforceability requirements: clear obligations, objective measurement, defined exclusions, and workable remedies.
A Service Level Agreement (SLA) defines measurable service performance obligations (KPIs), how performance is measured, and what remedies apply if targets are missed.
In Nepal contracts, the SLA typically operates under an MSA and/or SOW and becomes binding when properly incorporated as a schedule or annex with clear priority rules.
The SLA legal framework Nepal approach focuses on enforceable obligations: measurable standards, transparent measurement, reporting, and remedies (credits, damages, termination triggers).
Common SLA metrics include availability/uptime, response time, resolution time, and service availability windows with exclusions for maintenance, dependencies, and force majeure.
Remedies commonly include service credits SLA, liquidated damages (where properly structured), escalation rights, and termination rights for repeated or critical failures.
Documentation matters: KPIs without agreed measurement tools, data sources, and dispute rules often lead to payment disputes and difficult enforcement.
The information provided is for general guidance on contract structuring and compliance.
It is not legal advice and should not be relied on as a substitute for professional counsel.
SLA requirements and risk allocation vary by sector (IT, telecom, logistics, outsourcing) and project profile.
Professional legal review is recommended before signing or enforcing an SLA.
An SLA is generally enforceable in Nepal when it forms part of a valid contract and states measurable obligations with agreed remedies consistent with the parties’ commercial intent and applicable principles under the Contract Act Nepal and broader commercial practice. The core enforceability question is whether the SLA’s performance promises are sufficiently certain and incorporated into the contract relationship.
Key enforceability principles (high-level) include:
Offer, acceptance, and intention to create legal relations in a commercial setting
Lawful object and consideration (service fees, recurring payments, milestones)
Certainty of terms (clear obligations rather than vague “best efforts” without metrics)
Capacity and authority (signatories authorized; board approvals where needed)
Consistency with public policy (no unlawful penalty design or unconscionable clauses)
How SLAs become binding in Nepal contracts commonly occurs through:
Incorporation by reference: MSA/SOW states that “SLA Schedule A” is part of the agreement.
Annex/Schedule structure: SLA appended and signed/initialed with the main agreement.
Order of precedence: MSA defines which document controls in conflicts (MSA vs SOW vs SLA).
Change control adoption: new SLA versions become effective only through written change order or amendment.
Clarity requirements that strengthen enforceability include:
Measurable obligations: defined KPIs, formulas, and service windows.
Evidence and measurement rules: agreed tools, logs, ticketing systems, and data sources.
Remedies and triggers: service credits, escalation, cure periods, termination thresholds.
Claim procedures: notice periods, required evidence, review process, and dispute steps.
In practice, enforcement risk increases when the SLA is treated as an “operational document” that is not formally incorporated, updated informally, or contradicted by SOW scope definitions.
An SLA is a performance and remedy document, an MSA is the legal and commercial framework, and an SOW defines the specific scope—together they form a structured contract system for outsourcing and managed services in Nepal. Clear separation reduces disputes by aligning “what is delivered” (SOW), “how performance is measured” (SLA), and “legal/commercial rules” (MSA).
H3 definitions (contract stack)
MSA (Master Services Agreement): governs overall legal terms—payment, liability caps, confidentiality, IP, dispute resolution, governing law, compliance, and general obligations.
SOW (Statement of Work): defines the specific work package—deliverables, scope boundaries, timelines, acceptance criteria, pricing model, resource assumptions.
SLA (Service Level Agreement): defines performance metrics—availability, response/resolution, reporting, incident handling, credits, and escalation.
Common structuring models used in Nepal contracts:
Model 1: MSA + SLA (as schedule) + SOWs (as separate orders)
Best for long-term relationships with multiple projects.
Model 2: Single agreement with embedded SLA section + annexed KPI schedules
Used for medium complexity outsourcing with one main service stream.
Model 3: Framework contract + service catalog + SLA per service tower
Useful for IT, BPO, and facilities management across multiple service types.
Priority/interpretation clause importance:
Without an order of precedence, conflicts arise (e.g., SOW promises “24/7 support” but SLA measures only business hours).
A typical approach is: MSA controls legal terms, SOW controls scope and pricing, SLA controls performance metrics, unless the parties specify otherwise.
A valid and enforceable SLA in Nepal clearly defines the service boundary, measurable KPIs, measurement rules, and remedies, and it aligns escalation and termination triggers with evidence-based reporting. A drafting checklist ensures the SLA functions as a practical enforcement tool rather than a vague operational note.
Service description and boundaries (in-scope/out-of-scope)
Define service components, service towers, locations, users, and interfaces.
Availability window and exclusions
Business hours vs 24/7, holidays, planned maintenance, customer-caused downtime.
KPI definitions and formulas
Precise definitions, calculation method, and rounding rules.
Measurement tools and data source
Monitoring system, ticketing tool, call logs, courier scans, audit logs.
Reporting frequency and review meetings
Weekly/monthly dashboards; quarterly service reviews; sign-off mechanism.
Incident classification and escalation
Severity levels, escalation ladder, response/resolution timers, notifications.
Credits/penalties and claim process
Service credit model, caps, evidence required, invoice adjustments.
Change management mechanism
Written change requests, impact assessments, revised targets, effective dates.
Termination triggers tied to SLA failure
Repeated breach thresholds, critical incident rules, cure periods.
Audit rights and record retention
Access to logs and records; retention period; format; confidentiality controls.
Dispute resolution and evidence rules
Data hierarchy, independent verification, escalation steps, formal dispute clause.
Scope creep is best prevented by defining responsibilities using a clear RACI-style allocation and stating customer obligations, third-party dependencies, and exclusions that affect KPI calculations. In Nepal outsourcing contracts, many SLA disputes occur because the provider is measured against outcomes that depend on customer approvals or external systems.
H3 RACI concept (applied in SLA context)
Responsible: the party performing the task (e.g., provider resolves incidents).
Accountable: the party owning final outcome (e.g., provider accountable for uptime).
Consulted: parties whose input is required (e.g., customer change approvals).
Informed: parties who must receive updates (e.g., steering committee).
Customer obligations that should be explicit:
Provide timely access, credentials, and premises entry where applicable.
Provide approvals within defined timelines (e.g., change approvals, acceptance).
Provide accurate information and escalation contacts.
Maintain customer-owned equipment or networks where dependencies exist.
Pay invoices on time if suspension rights are included.
Third-party dependencies and exclusions:
Cloud platforms, telecom carriers, upstream providers, courier networks, power supply, landlord systems, and government systems (where relevant).
Clearly state when downtime is excluded or counted separately (e.g., “third-party outage category”).
Practical boundary wording (snippet-ready format):
In-scope: “Helpdesk L1-L2, incident triage, remote remediation, on-site dispatch within Kathmandu Valley.”
Out-of-scope: “Hardware replacement not covered by warranty, customer-owned network failures, new feature development.”
SLA KPIs are enforceable only when each metric has a precise definition, calculation formula, measurement source, service window, and exclusions for maintenance, dependencies, and force majeure. Strong KPIs and performance metrics Nepal contract drafting reduces disputes by ensuring both parties measure the same thing the same way.
H3 Table-style text examples (definitions and targets)
Availability / Uptime (%)
Definition: Percentage of time the service is operational and reachable within the service window.
Formula: (Total service window minutes – unplanned downtime minutes) ÷ total service window minutes × 100
Target: 99.5% per month
Threshold (minimum acceptable): 99.0% per month
Exclusions: planned maintenance (pre-notified), customer-caused outage, force majeure, third-party carrier outage (if defined)
Response time (minutes)
Definition: Time from ticket creation/notification to provider acknowledgment and initial action.
Measurement: Ticketing tool timestamp and acknowledgment timestamp
Target: Sev-1 within 15 minutes; Sev-2 within 30 minutes
Threshold: Sev-1 within 30 minutes; Sev-2 within 60 minutes
Resolution time (hours/days)
Definition: Time from ticket creation to service restoration or workaround acceptance.
Measurement: Ticketing close time or restore confirmation
Target: Sev-1 within 4 hours; Sev-2 within 12 hours
Threshold: Sev-1 within 8 hours; Sev-2 within 24 hours
First-call resolution (if applicable)
Definition: Percentage of incidents resolved during first contact without escalation.
Target: 70% monthly
Threshold: 60% monthly
Notes: Exclude Sev-1 incidents or complex changes if agreed.
Delivery turnaround time (logistics)
Definition: Time from pickup scan to delivery scan within defined lanes.
Target: 95% within T+1 day (in-city); 90% within T+2 days (intercity)
Threshold: 90% and 85% respectively
Exclusions: customer address errors, customer unavailability, force majeure, restricted areas
Mean time to repair/restore (MTTR)
Definition: Average time to restore service for qualifying incidents in a period.
Target: MTTR ≤ 6 hours for Sev-1/Sev-2 combined
Threshold: MTTR ≤ 10 hours
Notes: Define incident population included in MTTR.
H3 Baseline, target, and threshold
Baseline: current measured performance before SLA enforcement (e.g., last 60–90 days).
Target: expected performance (commercial promise).
Threshold: minimum acceptable level before stronger remedies or termination triggers apply.
Planned maintenance and force majeure handling:
Planned maintenance should require advance notice, window limits, and reporting.
Force majeure should be defined and tied to notice and mitigation duties, while clarifying how SLA timers pause or exclude time.
An incident severity model is enforceable and operationally useful when each severity level defines business impact, service impact, response/resolution targets, and mandatory escalation steps with communication timelines. Nepal service contracts often fail because “urgent” incidents are not categorized consistently, causing disputes over missed response or resolution.
H3 Severity model (Sev-1 to Sev-4)
Sev-1 (Critical): Complete service outage or major security incident; significant business disruption.
Sev-2 (High): Major degradation affecting many users or core functions; workaround limited.
Sev-3 (Medium): Partial impairment with workable workaround; limited user impact.
Sev-4 (Low): Minor issue or information request; no material disruption.
H3 Table-style text matrix (impact + targets)
Sev-1:
Impact: Service unavailable or severe breach risk
Response: 15 minutes
Restore/Resolution: 4 hours
Updates: Every 30–60 minutes
Escalation: Duty manager + senior engineer + customer sponsor notification
Sev-2:
Impact: Significant degradation
Response: 30 minutes
Restore/Resolution: 12 hours
Updates: Every 2 hours
Escalation: Team lead + customer project manager
Sev-3:
Impact: Limited impairment
Response: 4 business hours
Restore/Resolution: 2 business days
Updates: Daily or as agreed
Escalation: Standard support chain
Sev-4:
Impact: Minor issue/request
Response: 1 business day
Restore/Resolution: As scheduled
Updates: As needed
Escalation: Optional
H3 Communication and RCA timelines
Define mandatory notification channels (email, ticketing, hotline).
Define incident report timing and root cause analysis (RCA) deadlines (e.g., Sev-1 RCA within 5 business days).
Clarify who approves closure and workaround acceptance.
Remedies in an SLA must be structured as lawful, measurable, and commercially reasonable outcomes—typically service credits or liquidated damages—while avoiding drafting that functions as an unenforceable penalty. The key is to align the remedy type with the loss model, evidence requirements, and caps under commercial contract law Nepal practice.
H3 Differences (practical and drafting-focused)
Service credits (contractual pricing adjustment)
Nature: A pre-agreed reduction in fees when service levels are missed.
Use case: Managed services billed monthly; credits applied to next invoice.
Drafting focus: objective triggers, claim window, caps, and non-exclusivity rules.
Liquidated damages (pre-estimated loss)
Nature: Pre-agreed sum representing estimated loss for breach (e.g., delay, outage).
Use case: Projects where downtime or delay causes measurable losses.
Drafting focus: must be framed as genuine pre-estimate and proportionate to risk.
Penalty clauses (drafting caution)
Nature: Excessive or punitive sums designed to punish rather than compensate.
Risk: Higher enforceability challenges and negotiation resistance.
Drafting focus: avoid language implying punishment; use reasoned caps and linkage to likely loss.
H3 Table-style text example (service credit model)
Metric: Monthly availability
99.5% to 99.0%: 2% of monthly fee credited
98.99% to 98.0%: 5% of monthly fee credited
97.99% to 97.0%: 10% of monthly fee credited
Below 97.0%: 15% of monthly fee credited + mandatory improvement plan
Claim procedure essentials:
Notice: customer must notify within a defined period (e.g., 15–30 days after report).
Evidence: monitoring logs, ticket records, timestamps, independent verification rules.
Review: provider may dispute within a set time; escalation path applies.
Caps: total credits capped per month/quarter (e.g., 15–25% of monthly fees).
Carry-forward: whether unused credits roll over; whether credits are sole remedy.
Stacking rules and liability caps:
Define whether multiple breaches stack or whether the highest credit applies.
Align with MSA liability limitation: credits may sit “inside” the cap or be separate, but this must be explicit.
If termination rights exist for repeated failures, link those triggers to objective thresholds rather than discretionary dissatisfaction.
SLA governance works when reporting is regular, evidence-based, and tied to review meetings, corrective action plans, and acceptance workflows that prevent disputes over performance history. Without governance, KPI disputes become invoice disputes, and enforcement becomes expensive and uncertain.
Monthly/quarterly reporting obligations:
Monthly SLA dashboard with KPI results, downtime summaries, incident metrics, and credit calculations.
Quarterly service review minutes capturing issues, backlog, risk register, and agreed improvements.
Evidence rules and data hierarchy:
Define which data source prevails: monitoring tool vs ticketing system vs customer logs.
Require time synchronization (time zone, NTP) for timestamp integrity.
Define record retention period (e.g., 12–24 months).
Improvement plans for repeated breaches:
Trigger a service improvement plan (SIP) when thresholds are breached repeatedly.
SIP should include root cause themes, actions, owners, deadlines, and verification method.
Failure to implement SIP can be a separate breach or termination trigger.
Customer sign-off and acceptance workflows:
Define who signs reports (customer SPOC) and what happens if sign-off is delayed.
Use deemed acceptance rules carefully: require objective evidence and notice.
SLA targets must be updated through a written change process whenever scope, volume, tools, or dependencies change, otherwise KPI enforcement becomes unfair and commercially unstable. In Nepal vendor relationships, “silent scope expansion” is a common cause of disputes because services increase while KPIs and pricing remain static.
How to adjust KPIs when scope/volume changes:
Tie KPI targets to measurable volumes (tickets per month, users, sites, transaction load).
Require impact assessment: staffing, tooling, third-party costs, and realistic targets.
Define transitional periods after major changes (e.g., 30-day stabilization).
Version control and effective dates:
Assign SLA version numbers, effective dates, and superseding rules.
Maintain change logs and approvals for audit readiness.
Pricing adjustments tied to changes:
Define whether KPI tightening increases fees or requires additional resources.
Define whether new services require a new SLA schedule.
Avoiding silent scope expansion:
No KPI applies to a service unless it is listed as in-scope and priced.
Informal requests must be documented as change requests with revised SLA metrics.
SLA term and termination rights are enforceable and commercially workable when they align with the MSA/SOW term, define cure opportunities, and use objective triggers for repeated or critical failures. Misalignment creates disputes where the SLA “expires” but services continue, or termination is claimed without measurable thresholds.
SLA term alignment with MSA/SOW:
SLA should run for the same period as the service scope it measures.
If multiple SOWs exist, define whether one SLA applies to all or each SOW has its own SLA schedule.
Suspension rights for non-payment or customer breach:
Define suspension triggers (e.g., overdue beyond X days) and notice requirements.
Clarify how SLA measurement is treated during suspension (paused timers, excluded windows).
Ensure suspension does not violate critical regulatory obligations where applicable.
Termination triggers: repeated failures and critical incidents
Repeated breach example (table-style):
Availability below threshold in 2 consecutive months, or
Availability below threshold in 3 months within any rolling 6-month period
Critical incident termination:
Defined Sev-1 failure exceeding maximum restoration time by a stated multiple
Major data breach or repeated security incident, where relevant
Cure periods:
Provide cure where practical but preserve immediate termination for severe risks.
Exit assistance and transition support:
Define handover timelines, documentation transfer, and data return formats.
Require reasonable cooperation for transition to a replacement provider.
Clarify fees for exit assistance if it is beyond standard obligations.
SLA drafting should include security and confidentiality performance obligations when service delivery involves data access, system administration, or regulated environments, with clear incident response alignment and subcontractor controls. Even when security is primarily addressed in the MSA, operational security metrics and response timelines can be governed in the SLA for practical enforcement.
Confidentiality and data handling duties:
Define classification of confidential information and permitted use.
Define access controls, least privilege, and credential management.
Define encryption requirements where appropriate (in transit/at rest), without overcommitting beyond capability.
Operational controls (table-style text)
Access controls:
Role-based access; periodic access review (e.g., quarterly)
Audit logs:
Administrative actions logged; retention period defined
Subcontractor controls:
Flow-down confidentiality; approval requirements; accountability for subcontractors
Sector compliance notes (high-level framework)
Banking/financial services: stronger audit trails, vendor oversight, and incident reporting expectations.
Telecom: availability and service continuity expectations; network dependencies.
Health: patient data sensitivity; stricter access and breach notification alignment.
Breach notification and incident response alignment:
Define notification timelines (e.g., initial notice within 24 hours of confirmed incident).
Define incident classification linked to severity model.
Define investigation cooperation and evidence preservation duties.
Most SLA failures in Nepal contracts come from vague KPIs, unclear measurement sources, missing claim procedures, and weak incorporation into the main contract. Avoiding these mistakes improves enforceability, reduces disputes, and strengthens operational accountability.
Vague KPI definitions
Mistake: “High uptime” or “quick response” without formulas and windows.
Fix: define service window, downtime definition, formula, and rounding rules.
No measurement source or dispute mechanism
Mistake: parties rely on different tools and logs.
Fix: define primary tool, data hierarchy, audit rights, and dispute steps.
Credits without claim procedure
Mistake: credits stated but no notice window, evidence, or invoice method.
Fix: add claim timeline, evidence requirements, review, and how credits apply.
No customer obligations (access/approvals)
Mistake: provider measured against outcomes blocked by customer delays.
Fix: define customer responsibilities and pause rules for SLA timers.
KPIs that ignore maintenance windows and dependencies
Mistake: planned maintenance counted as breach; third-party outages blamed on provider.
Fix: define exclusions, notice rules, and dependency categories.
SLA not properly incorporated into the main contract
Mistake: SLA shared as operational document, unsigned, or updated informally.
Fix: annex the SLA, sign/initial, define precedence, and use formal change control.
Legal support adds value to SLA drafting by mapping operational KPIs to enforceable contract obligations, aligning remedies with liability frameworks, and establishing dispute-prevention mechanisms grounded in Nepal contract practice. Well-structured SLAs reduce misunderstandings by connecting performance measurement to clear contractual rights and evidence.
SLA structuring and negotiation support:
Define contract stack and precedence (MSA/SOW/SLA) and prevent conflicts.
Translate business needs into measurable SLA metrics and workable exclusions.
Negotiate realistic targets and balanced obligations for both parties.
KPI/remedy risk mapping:
Select remedies appropriate to service type (credits vs damages vs termination).
Draft caps, stacking rules, and claim procedures consistent with liability limits.
Ensure remedies are commercially rational and operationally implementable.
Alignment with MSA/SOW, liability caps, and compliance controls:
Ensure SLA does not contradict payment terms, acceptance criteria, or scope definitions.
Align reporting and audit provisions with confidentiality and data protection controls.
Integrate change management and governance to maintain consistency over time.
Dispute prevention and dispute resolution support:
Strengthen evidence rules, escalation paths, and structured negotiation steps.
Support mediation/arbitration/litigation strategy where performance records, logs, and notices are central.
1. Is an SLA legally enforceable in Nepal?
Yes, an SLA is generally enforceable if it is incorporated into a valid contract and contains clear, measurable obligations with defined remedies consistent with Nepal contract principles.
2. What is the difference between SLA and SOW?
An SOW defines what work will be delivered and accepted, while an SLA defines how service performance is measured over time and what happens if performance falls below targets.
3. What is the difference between SLA and MSA?
An MSA sets the overall legal and commercial terms (payment, liability, dispute resolution), while an SLA sets performance metrics, measurement rules, and operational remedies.
4. How should an SLA be incorporated into the main contract?
The safest approach is to attach the SLA as a signed annex/schedule, reference it in the MSA/SOW, and include an order of precedence clause.
5. What KPIs are best for IT managed services in Nepal?
Common KPIs include availability/uptime, response time, resolution time, MTTR, ticket backlog, and change success rate, each with defined service windows and exclusions.
6. How is downtime measured in an SLA?
Downtime should be defined using objective monitoring logs and ticket timestamps, with clear exclusions for planned maintenance, customer-caused events, and defined dependencies.
7. How are service credits calculated in an SLA?
Service credits are typically calculated as a percentage of monthly fees based on KPI shortfalls, with defined bands, caps, and an invoice adjustment process.
8. Are service credits the same as penalties?
No, service credits are usually structured as fee adjustments tied to performance, while penalties are punitive sums that may raise enforceability concerns if excessive.
9. When should liquidated damages be used in an SLA?
Liquidated damages are used when likely loss from breach can be reasonably pre-estimated, such as measurable outage impact or delivery delays, and should be drafted proportionately.
10. Can repeated SLA breaches justify termination?
Yes, termination can be justified if the contract sets objective thresholds (e.g., repeated breaches in a rolling period) and cure rules where appropriate.
11. What is an incident severity matrix in an SLA?
It is a structured classification (Sev-1 to Sev-4) linking business impact to response times, resolution targets, escalation steps, and communication obligations.
12. What should an SLA say about planned maintenance?
It should define notice requirements, permitted windows, duration limits, and whether maintenance is excluded from availability calculations.
13. How should SLA disputes about measurement be handled?
The SLA should define data source hierarchy, audit rights, evidence retention, escalation steps, and a formal dispute mechanism under the MSA.
14. Should customer obligations be included in an SLA?
Yes, customer responsibilities (access, approvals, timely information) should be defined because they directly affect KPI performance and fairness.
15. How often should SLA reports be issued?
Monthly reporting is common for managed services, with quarterly governance reviews to address trends, improvement plans, and recurring breaches.
16. What is the biggest drafting mistake in SLAs in Nepal?
The most common mistake is vague KPIs without agreed measurement tools, evidence rules, and a clear claim process for credits or other remedies.
February 26, 2026 - BY Admin