Three Days Offline, Ten Percent Back

A regional logistics company runs dispatch through a cloud platform that costs $8,000 a month. When the platform goes down for most of three business days, trucks sit idle, customers cancel, and the company estimates its losses at $240,000. The vendor responds by citing the service level agreement: because uptime fell below 99.9 percent, the customer is entitled to a credit of 10 percent of that month’s fee, or $800 applied to the next invoice.

The gap between $240,000 and $800 is not an accident. It results from several clauses, usually spread across a master agreement, an SLA document, and terms incorporated by link, that work together to keep the vendor’s exposure small.

How the Clauses Stack

The first is usually the service credit, which the contract describes as the customer’s sole and exclusive remedy for availability failures. A limitation of liability clause then caps total damages, often at the fees paid over the prior twelve months, and a separate waiver excludes consequential damages, the category where lost profits and lost customers usually fall. Each clause on its own is common and generally enforceable between businesses, but together they can reduce a serious outage to a billing adjustment.

Courts tend to enforce these provisions as written when businesses negotiated them, or at least had the opportunity to. As a result, the customer’s strongest arguments usually lie at the edges of the contract.

Where the Edges Are

The first edge is scope. An exclusive remedy for availability may not govern a different failure, such as lost or corrupted data, a security incident, or a breach of support obligations, so a precise reading may show that the credit controls less of the dispute than the vendor suggests.

The second is carve-outs. Many caps exclude gross negligence, willful misconduct, confidentiality breaches, or indemnification obligations, so whether an outage resulted from ordinary negligence or something worse can matter a great deal. The answer often sits in the vendor’s own incident report.

The third is the failure of the remedy itself. For sales of goods, the Uniform Commercial Code lets a buyer escape a limited remedy that fails of its essential purpose. SaaS agreements are often treated as service contracts to which the UCC may not apply, but similar arguments can arise under general contract principles when a limited remedy leaves the customer with essentially nothing. These arguments are fact-specific and far from guaranteed.

The fourth is termination. Chronic SLA failures may give the customer a right to exit and recover prepaid fees, which creates leverage even when damages are capped.

The Deadline in the Fine Print

Whatever arguments the customer pursues, it should not lose the one remedy the contract clearly provides. Service credits frequently must be requested in writing within a short period, sometimes 30 days after the month of the outage, and a customer focused on restoring operations can easily miss that window. Because uptime calculations also tend to exclude scheduled maintenance and third-party failures, the customer’s own records of when and how the service failed matter.

Look Beyond the Vendor

Finally, businesses often overlook their own insurance. Some cyber and business interruption policies include dependent or contingent business interruption coverage for losses caused when a vendor’s systems fail. Coverage turns on policy language, waiting periods, and whether the outage stemmed from a security event or an ordinary system failure, but the policy may reach losses the vendor contract never will, subject to its own notice requirements.

The SLA tells the customer what the vendor agreed to pay, but not what the outage was worth or who else might owe for it. A business that accepts the $800 credit without asking those questions has let the vendor’s paperwork define the loss.

We help businesses evaluate SLA claims, liability caps, and insurance coverage after a vendor failure. If an outage has cost your business more than the contract seems to allow, we can review the agreements and your policies before key deadlines pass. Contact us to discuss your matter.

This article provides general information and does not constitute legal advice. For guidance concerning a specific matter, see our commercial litigation services. The available remedies depend on the contract language, the cause of the outage, and the insurance in place. To discuss potential representation, request a consultation. Submitting an inquiry does not establish an attorney-client relationship.