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A Service Level Agreement (SLA) is an electronic contract between a service user and a provider, and specifies the service to be provided, Quality of Service (QoS) properties that must be maintained by a provider during service provision (generally defined as a set of Service Level Objectives (SLOs)), and a set of penalty clauses specifying what happens when service providers fail to deliver the QoS agreed. Although significant work exists on how SLOs may be specified and monitored, not much work has focused on actually identifying how SLOs may be impacted by the choice of specific penalty clauses. A trusted mediator may be used to resolve conflicts between the parties involved. The objectives of this work are to: (i) identify classes of penalty clauses that can be associated with an SLA; (ii) define how to specify penalties in an extension of WS-Agreement; and (iii) specify to what extent penalty clauses …