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What Is a SaaS Agreement?
A SaaS agreement, or a software as a service agreement, lays out terms and conditions of a software delivery model. In this type of model, software and data will be centrally hosted and users will access the software and data over the internet.
A SaaS agreement may include heavy service elements, or it may just give end users access to products that can alternatively be licensed in a traditional way. No additional software or hardware is needed in the SaaS model, as data is uploaded into a system and then saved in the cloud.
Is a SaaS Agreement Different From a Licensing Agreement?
A SaaS agreement differs from a licensing agreement.
Under a licensing agreement, a company will usually deliver the actual software for use, typically for a single or monthly fee. Software and relevant hardware must be physically installed.
In a SaaS agreement, on the other hand, customers get access to software and other technology through the cloud, but no physical goods are exchanged. A SaaS agreement will give end users access to the products involved online. As a result, the structure of a SaaS agreement focuses on permitting the use of a product instead of allowing product use as a service.
Important Clauses Found in a SaaS Agreement
An individual SaaS agreement will have unique needs and therefore different clauses. The specific clauses in an agreement will depend on the following relevant information:
However, all cloud service agreements will share certain terms and agreements. This includes:
Access right and users:
Most SaaS agreements will have a metric to limit access to either a certain number of users or a certain amount of data. Your agreement should:
- Detail that metric
- Define what a user is
- Establish penalties for abuse
Customer service and support:
Provisions should establish:
- How you will provide support for your services
- Response time
- Any additional guarantees in terms of expected service
- Data ownership: This vital component of a cloud service agreement establishes who gets the rights to data that is entered into a platform or service.
This section is particularly important in consumer markets. The section should detail:
- Encryption responsibilities
- How often data will be backed up
- Protections offered
- Security of entered data
What happens to data in the event of:
- A security breach
- Termination of service use
- Where data is stored.
- License scope: You should define and limit the rights that you transfer to subscribers.
- Limitation of liability: You should also make any damages available clear, and you can cap contractual liability.
- Master agreement language: Most agreements will include language that makes this document the master document for all services you offer so you do not have to negotiate or sign a completely new contract every time a customer wants to renegotiate or change the services provided.
Detail what end users should expect from your service. This should include:
- Relevant results
- What your service does not promise
Pricing and when your company has the right to charge detailed costs should be established in the agreement. As SaaS agreements typically use a subscription model, you will usually get payment in one of the following ways:
- Rights to a physical copy: Most SaaS agreements state that customers do not have a right to a physical copy of the software used.
- SLA: A cloud service agreement typically also includes a Service Level Agreement, or SLA. The SLA sets a minimum performance standard for a SaaS. Performance standards are generally related to service availability. In this part of the agreement, you can set your service's uptime percentage for services that are critical to business operations.
- Subscription plan and model: Provisions should specify exactly what the subscription plan includes, as well as how your services will be delivered.
- Term, Termination, and Renewal: These three clauses should establish the agreement's term and the processes that should be followed to terminate or renew the service. Generally, a SaaS agreement will have evergreen renewal. This means the agreement will be renewed automatically for another term, unless a customer actively terminates their agreement before an established date.
Types of Agreements SaaS Companies Need
Company-level agreements for SaaS companies can include:
- Assignment of intellectual property, or IP transfer agreements
- Confidentiality/non-disclosure agreements
- Employment agreements
- Shareholders agreements
Customer-facing agreements can include:
- Master services agreements
- Purchase and sales order agreements
- Service level agreements
Third-party agreements can include:
- Advisor agreements
- Affiliate or partner agreements
- Contractor agreements
Public-facing policies can include:
- Privacy policies
- Security policies
- Trademark policies
Image via Unsplash by arifriyanto
You might hear this type of agreement referred to in the following ways:
- Terms of service
- Terms and conditions
Practically speaking, they're all the same thing.
Clauses to include in this agreement are:
- Business contact information
- Copyright and intellectual property rights
- How customers can end the service contract, including penalties should they end a contract early
- How your SaaS handles content generated by users
- Laws that govern the contract
- Licensing information
- Limitations of liability and disclaimers of warranties
- Payment term specifics
- Restrictions and/or limitations of use
Privacy Policies for a SaaS
- California: The California Online Privacy Protection Act ( CCPA ).
- Canada: The Personal Information Protection and Electronic Documents Act ( PIPEDA ).
- European Union: General Data Protection Regulation ( GDPR ).
- What personal data your service collects and uses
- How your service collects and uses personal data
- How your service stores personal data
- Whether your service shares personal data with third parties
Information about cookies:
- If cookies are used
- Which cookies are used
- Why cookies are used
How users can:
- Limit the data that is collected and used
- Withdraw consent to have their data collected and used
- Request to have data deleted
SaaS agreements are integral parts of any software as a service company. Make sure you work with lawyers who know how these contracts work when crafting yours.
Meet some of our SaaS Agreement Lawyers
I am a corporate lawyer with expertise working with small businesses, venture capital and healthcare. Previously, I worked at large law firms, as well as head attorney for companies. I graduated from Harvard College and University of Pennsylvania Law School. I speak 5 languages (Spanish, French, Italian and Russian, plus English), visited over 60 countries, and used to compete in salsa dancing!
Legal services cost too much, and are often of low quality. I have devoted my law practice to providing the best work at the most affordable price—in everything from defending small businesses against patent trolls to advising multinational corporations on regulatory compliance to steering couples through a divorce.
I am a licensed attorney and a member of the California Bar. I graduated from the University of Dayton School of Law's Program in Law and Technology. I love IP, tech transfers, licensing, and how the internet and developing technology is changing the legal landscape. I've interned at both corporations and boutique firms, and I've taken extensive specialized classes in intellectual property and technology law.
Jo Ann J.
Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.
I am an unabashed contract law geek with a passion for delivering contracts that protect your business within your risk tolerance. Contracts should be clear, concise, and able to be understood by the end user. I promote Plain English contract drafting. I also pay close attention to the boilerplate traps that trip up many agreements. Some of my most frequent drafting projects are entity operating and shareholder agreements, bylaws, asset purchase agreements, commercial leases, EULA, Terms of Service, Privacy Policies, Confidentiality agreements, employment agreements, and more.
I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.
Texas licensed attorney specializing for 20 years in Business Law, Contract Drafting, and Risk Analysis. My services include: General Business Law Advisement; Risk Analysis and Consulting; Contract Review and Drafting; Legal Research and Writing, including Motion Practice; Business Formation; Article or Instructive Writing; and more. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.