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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 1984 graduate of the Benjamin N Cardozo School of Law (Yeshiva University) and have been licensed in New Jersey for over 35 years. I have extensive experience in negotiating real estate, business contracts, and loan agreements. Depending on your needs I can work remotely or face-to-face. I offer prompt and courteous service and can tailor a contract and process to meet your needs.
Tim advises small businesses, entrepreneurs, and start-ups on a wide range of legal matters. He has experience with company formation and restructuring, capital and equity planning, tax planning and tax controversy, contract drafting, and employment law issues. His clients range from side gig sole proprietors to companies recognized by Inc. magazine.
For over thirty (30) years, Mr. Langley has developed a diverse general business and commercial litigation practice advising clients on day-to-day business and legal matters, as well as handling lawsuits and arbitrations across Texas and in various other states across the country. Mr. Langley has handled commercial matters including employment law, commercial collections, real estate matters, energy litigation, construction, general litigation, arbitrations, defamation actions, misappropriation of trade secrets, usury, consumer credit, commercial credit, lender liability, accounting malpractice, legal malpractice, and appellate practice in state and federal courts. (Online bio at www.curtmlangley.com).
Real Estate and Business lawyer.
Davis founded DLO in 2010 after nearly a decade of practicing in the corporate department of a larger law firm. Armed with this experience and knowledge of legal solutions used by large entities, Davis set out to bring the same level of service to smaller organizations and individuals. The mission was three-fold: provide top-notch legal work, charge fair prices for it, and never stop evolving to meet the changing needs of clients. Ten years and more than 1000 clients later, Davis is proud of the assistance DLO provides for companies large and small, and the expanding service they now offer for individuals and families.
Braden Perry is a corporate governance, regulatory and government investigations attorney with Kennyhertz Perry, LLC. Mr. Perry has the unique tripartite experience of a white-collar criminal defense and government compliance, investigations, and litigation attorney at a national law firm; a senior enforcement attorney at a federal regulatory agency; and the Chief Compliance Officer/Chief Regulatory Attorney of a global financial institution. Mr. Perry has extensive experience advising clients in federal inquiries and investigations, particularly in enforcement matters involving technological issues. He couples his technical knowledge and experience defending clients in front of federal agencies with a broad-based understanding of compliance from an institutional and regulatory perspective.
William L Foster has been practicing law since 2006 as an attorney associate for a large litigation firm in Denver, Colorado. His experience includes drafting business contracts, organizational filings, and settlement agreements.