Service levels, penalties and termination rights in customer contracts must be checked against performance data and disclosure before signing.
BRANDAUER Rechtsanwälte
Salzburg law firm for corporate, company and transaction law
Every transaction is handled by a coordinated team of lawyers, legal staff and specialists. In company acquisition matters we look at structure, contract, tax and liability together.
Service levels, response times and contractual penalties in customer contracts can materially change the value of a target business. Seemingly stable revenue is worth less if SLA breaches, credits or termination rights are already pending.
The buyer must review not only contract volume and term but also performance incidents, escalations, credits and penalty risks. In IT, maintenance, logistics and B2B service contracts this detail often decides price and warranties.
This post separates the issue from general framework agreements and software acquisitions. The focus is the M&A review of live customer contracts.
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Without contract and performance data the buyer cannot assess whether revenue is robust.
A revenue list does not show whether a customer can terminate or claim a contractual penalty because of SLA breaches. Request contracts, service reports, tickets, credits and escalation lists.
Our post on framework agreements and supplier bonuses is closely related.
If breaches are disclosed and regulated, the buyer can reflect the risk in price, warranty and indemnity. It remains important to review whether recurring SLA problems are structural.
If known complaints or penalties are not disclosed properly, the buyer may be surprised after closing. Request a list of open cases and make material customer risks a condition.
Service levels often sit in schedules, service descriptions or ticket systems. The buyer should reconcile them with actual performance data. Only then is it clear whether the contract is profitable and deliverable.
Our post on software and SaaS acquisition shows how technical performance and contract risk interact.
A contractual penalty under Austrian civil law can reduce the economic value of a customer contract. The key issue is not only the clause but whether breaches already occurred and whether the customer has asserted claims.
The buyer should not discover open penalties only during integration. They belong in price negotiations and in the disclosure letter.
Many B2B contracts grant special rights after repeated SLA breaches. In an acquisition, customers may use the ownership change as a reason to review performance more strictly.
Change-of-control clauses and SLA rights must be read together. Otherwise apparently stable revenue may become a short-term churn risk.
This overview shows which special issues must not disappear in generic clauses.
| Point | Why it matters | Contract consequence |
|---|---|---|
| SLA Service levels | Determine deliverability and margin. | Performance data as data room schedule. |
| Penalty Contractual penalty | May be old risk or price issue. | Indemnity or price adjustment. |
| Termination Termination right | Threatens recurring revenue. | Closing condition for key customers. |
Austrian civil law and the contracts provide the framework. No fixed admissibility percentage should be assumed.
Practice note: Always review SLA clauses against ticket data, credits and customer correspondence. The contract alone does not show the risk.
Framework agreements regulate term, volume and call-offs. This post is narrower and checks whether the concrete performance obligation has already been breached or may be breached after continuation.
The topic therefore remains a specific acquisition issue and not a general article on penalties.
They show whether ongoing customer contracts can actually be performed. Repeated breaches may lead to credits, penalties or termination rights.
Known breaches should be disclosed in the data room and the disclosure letter. Otherwise the buyer needs warranties and where appropriate indemnities.
That depends on the clause, contract type and individual case. No fixed percentage can be assumed. The actual review under Austrian civil law and the contract is decisive.
A further post or focus page for the next review step.
A further post or focus page for the next review step.
A further post or focus page for the next review step.
A further post or focus page for the next review step.
When buying a company, structure, review and contract decide. Call us directly or send an email, callback within one business day.
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