Every Software-As-A-Service (SaaS) company must let its users know how to interact with their service using a SaaS agreement. However, many SaaS companies often don’t know how to write a SaaS agreement.
This article comprehensively explores everything you need to know about writing a SaaS agreement, including what exactly the SaaS contract is, what the agreement should include, its types, and examples.
Let’s explore SaaS agreements and how to write them.
What Is a Written SaaS Agreement?
A SaaS Agreement, or Software-As-A-Service agreement, is a legal contract that outlines how consumers can access and use a software product.
Prepared by a SaaS company, the SaaS contract serves as a license granted to a customer to use their product. However, this contract includes specific prohibitions and restrictions, which may vary from person to person.
As a legal contract defining the relationship between a customer and a SaaS company or user and software product, a SaaS agreement may cover a pilot, an auto-renewing subscription plan, a trial, and others, depending on the company's business model and the needs of its customers.
Learn more about SaaS agreements by reviewing ContractsCounsel’s overview.
How To Write a SaaS Agreement – Step by Step
Below is a step-by-step guide on how to write a SaaS agreement:
Step 1: Determine Your Agreement Terms
The first step to writing a SaaS agreement is determining the terms, whether fixed or monthly. While a fixed term is secured by an upfront payment or direct debit agreement, the latter is month to month, with the service restricted whenever a consumer fails to pay for the next month’s bidding.
Your underlying business model is a significant factor to consider when determining the suitable terms for your SaaS contract.
Step 2: Describe Your Services Effectively
Your customers deserve to know the SaaS services they’ll enjoy. One way to do this is by directing your customers to the services as described on your website. You may also choose to include a detailed description in the agreement itself.
Regardless, you must ensure your customers understand the services you will provide and agree to such by subscribing to your services. To confirm their understanding, consider your target audience and the level of details they need.
Step 3: Specify Your Provisions for Support and Maintenance
Undoubtedly, there would be periods you would need to fix errors or bugs or carry out general maintenance. While these must be done timely, your customers deserve to know how you plan to do this.
When expressively letting your customers know the fixed period for maintenance, ensure you consider time zones, especially if you and your customers are in different countries.
Step 4: Specify How You’ll Use Consumer Data
When writing a SaaS agreement, you must include how your company plans to use your customers’ data. And this may include information about customer data ownership, data security, data backups, the service’s host, data retrieval, and others.
Consulting with data privacy lawyers will help you understand what you can and cannot collect or store, and what your obligations are to the users of your product. This has become especially important since the European Union enacted the General Data Protection Regulation (GDPR), a major data privacy law that can potentially impact businesses anywhere in the world.
Learn more about California’s Consumer Privacy Act ( CCPA ).
Step 5: Retain Your Proprietary and Intellectual Property Rights
Ensure you retain the proprietary and Intellectual Property rights of the software service you’re providing with your SaaS agreement.
When writing a SaaS agreement, ensure you carefully describe any modifications or improvements made to your software resulting in a new intellectual property. Apart from describing, ensure the rights are vested in you.
Step 6: Limit Your Liability
Ensure your SaaS agreement includes a clause that limits your liability to customers. This clause should cover issues, such as the amount of liability, types of loss your company covers, consumer protection laws, liability with third-party websites, and others.
Explore ContractsCounsel’s contract clauses guide.
Step 7: Choose a Governing Law
Finally, choose the law that governs your SaaS Agreement and include it in a governing law clause. As a legal contract binding consumer usage of your SaaS product, the SaaS agreement also applies to all your customers worldwide. Therefore, to avoid fighting lawsuits in countries where your consumers are located, ensure your SaaS Agreement is governed by the country’s laws in which you reside.
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What Should Be in A SaaS Agreement?
Having understood the steps to take when writing a SaaS agreement, you must also know what you must include in your SaaS Agreement.
However, what should be in a SaaS Agreements varies based on your business and SaaS product. Nonetheless, below are elements that must be included in any SaaS contract:
- Start date and end date: The start date is when your SaaS agreement takes effect, and product subscription becomes available for use. The end date is the direct opposite.
- Licensing terms: These terms are the basis upon which your customers will use your SaaS product. Software license protects you from customers who might want to profit off your hard work.
- Billings and payments: The billing and payment terms lets your users know the fees they must pay, when to pay, and how it is to be paid.
- Warranties: You must specify included warranties and other disclaimers. This shows you agree your SaaS product can’t always be error-free, and at the same time, refuse to take responsibility for any inappropriate use of your service.
- Privacy terms and conditions: Let your customers know where and how their data would be used and to what extent the information they provide to use your SaaS product is protected
- SaaS Service-Level Agreement (SLA): SLA explicitly outlines the services you offer and how your customers should use them. This also includes the software license, terms, and conditions for hosting the SaaS software, software support and maintenance services, etc.
Here is an article about SaaS Agreement key clauses.
See SaaS Agreement Pricing by State
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Types of SaaS Agreements
Below is a list of different types of SaaS Agreements.
- Public Domain License: When you adopt the public domain license for your software, it means you are unrestrictedly allowing to use and modify the software. Anyone else can adopt and reuse your software as desired.
- Proprietary License: This agreement prevents anyone from modifying, copying, or distributing your SaaS product or software. It’s a very restrictive SaaS agreement.
- Permissive Agreement: This SaaS agreement features a few software modifications and distribution restrictions. Otherwise called the Apache Software License.
- Copyleft: This is also a restrictive agreement, less stringent than proprietary license but more restrictive than permissive agreement. Also called a reciprocal license, the Copyleft agreement allows the distribution or modification of a software product only if the new product being distributed will also have the same restriction or agreement.
- Lesser General Public License: This agreement allows you to link open-source libraries within your software.
Other types of technology agreements:
- End User License Agreements
- Acceptable Use Policies
- Cookies Policies
- Data Processing Agreements
- Privacy Policies
- User Agreements
Here is a list of different types of online contracts.
Examples of When to Use a SaaS Agreement
A SaaS agreement is used for different situations. Given the investment, often companies will wait to invest in an ironclad SaaS agreement once they start achieving customer traction. Some examples of when you may use a SaaS Agreement include:
- When you prove your minimum viable product has demand.
- When you need to prevent SaaS product abuse.
- When you want to license your product and not sell it.
- When you need to disclaim warranties and limit your liability.
- When you plan to terminate the use of your software anytime without issues.
Who Writes SaaS Agreements?
SaaS Agreements are typically unique and require analysis of your technology, customer base, data you’re collecting, and business model. For these reasons, it is advisable to work with technology lawyers to help you write your SaaS contract.
Otherwise, ensure you seek specialist legal advice to know the exact content to include in the agreement. This way, you can confirm the adequate protection of your rights.
You might also choose to use a SaaS Agreement template. However, only consider this option if it makes commercial sense. Nonetheless, when your SaaS product starts making a considerable amount of money, let a technology lawyer review and update your SaaS Agreement.
Get Help Writing Your SaaS Agreement
Do you need help writing a custom SaaS Agreement for your business? Post a project in ContractsCounsel’s marketplace to get free bids from technology lawyers that work with SaaS companies. All lawyers have been vetted and also have peer reviews for you to explore before hiring.
