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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 (i.e., granting access to software hosted remotely) instead of allowing product use as a service (i.e., allowing the licensee to install and run the software on their owner servers).
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:
- Industries
- Products
- Services
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.
-
Data security
This section is particularly important in consumer markets, especially with laws like the GDPR and CCPA. 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
- Bankruptcy
- 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.
-
Performance objectives
Detail what end users should expect from your service. This should include:
- Guarantees
- Relevant results
- What your service does not promise
-
Pricing
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:
- Monthly
- Quarterly
- Yearly
- Rights to a physical copy Most SaaS agreements state that customers do not have a right to a physical copy of the software used.
- Service Level Agreement (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.
- Dispute Resolution This clause outlines the methods and procedures the two parties have at their disposal in case a dispute arises between them.
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 Agreements SaaS Companies Need
If you have a software as a service company, you will need agreements at various levels. In addition to the SaaS agreement or terms of service / terms of use agreement for your customers, you may need a variety of other agreements.
-
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
- Terms of service/terms of use
-
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
Terms of Use and Privacy Policies Needed for a SaaS
No matter how your SaaS functions, you should have a terms of use and privacy policy in place for users. These agreements serve different purposes.
Terms of Use Agreements for a SaaS
This type of agreement will act as a legally binding contract between your company and your customers. You can use your terms of use to set guidelines and rules that customers must follow if they want to have access to the services your SaaS provides.
You might hear this type of agreement referred to in the following ways:
- Terms of use
- 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
- Details about what would happen if either party violated the terms of use
- How customers can end the service contract, including penalties should they end a contract early
- How your SaaS handles content generated by users
- How you will notify users about changes to the terms of use
- Laws that govern the contract
- Licensing information
- Limitations of liability and disclaimers of warranties
- Payment term specifics
- Restrictions and/or limitations of use
You should ensure that language you include in terms of use agreements are very clear. A judge may find an agreement is not clear enough to be upheld if you use too much legal or technical jargon for a user to reasonably understand.
Privacy Policies for a SaaS
If your SaaS service collects personal data, you must legally have a privacy policy. Many countries and regions have laws governing this, including:
- 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 ).
Almost all SaaS services will end up collecting at least one piece of information considered personal data: a user's email address. If you collect email addresses, that's enough to require that you have a privacy policy in place. Simply having a terms of use in place is not enough.
To be in compliance with most privacy directives, your privacy policy should include information about:
- 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
Nicholas V.
I am a solo practitioner with offices in Denver, Colorado and Austin, Texas with a focus on general business and real estate contracts.
Richard N.
I have been practicing law for 35 years. In addition to my law degree, I hold an MBA. I've created six companies, currently act as outside counsel to another 12, and have been an advisor to more than 500 startups and entrepreneurs.
David B.
Seasoned transactional attorney with extensive experience in the life sciences / medical device / pharmaceutical industries. Skilled at providing actionable legal advice that balances risk and reward.
Rishma E.
Rishma D. Eckert, Esq. is a business law attorney who primarily represents domestic and international companies and entrepreneurs. A native of both Belize and Guyana, she remains engaged with the Caribbean community in South Florida: as a Board Member and General Counsel for the Belize American Chamber of Commerce of Florida, and Member of the Guyanese American Chamber of Commerce. She holds a Bachelor of Laws degree (LL.B.) from the University of Guyana in South America, a Master’s degree in International and Comparative Law (LL.M.) from Stetson University College of Law in Gulfport, Florida, and earned a Juris Doctor degree (J.D.) from St. Thomas University School of Law in Miami, Florida. Licensed to practice in the State of Florida and the Federal Court in the Southern District of Florida, Mrs. Eckert focuses her passion and practice on domestic and international corporate structuring and incorporation, corporate governance, contract negotiation and drafting, and trademark and copyright registrations.
Kiel G.
Founder and Managing partner of Emerald Law, PLLC, a business law firm specializing in contract drafting and corporate transactions. Kiel worked as in house counsel for a variety of companies before launching his own firm, and most recently served as the Chief Legal Officer for an international private equity firm.
Jane C.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.
October 2, 2020
Mark A.
Mark A. Addington focuses his practice primarily on employment litigation, including contractual disputes, restrictive covenants (such as non-competition, non-solicitation, or confidential information restrictions), defense of wage and hour, harassment, retaliatory discharge, disability, age, religion, race, and sex discrimination.
Find the best lawyer for your project
Browse Lawyers NowContracts
SaaS Agreement
Florida
SaaS agreement and data ownership?
I am the founder of a small startup that is developing a software-as-a-service (SaaS) solution. We are in the process of negotiating a SaaS agreement with a potential customer and I am looking to understand what rights the customer will have to the data that they provide to us. We want to make sure that we are adequately protecting our intellectual property while also providing the customer with the ability to use the data they provide.
Diane D.
To be able to answer your question, I would need to see the SaaS agreement you have with your potential customer. I could then let you know your rights, and what you need to say in the Agreement to be fully protected and retain your data.
Contracts
SaaS Agreement
Illinois
Why do SAAS companies not provide warranties in their agreements?
Being asked to sign and am curious...
Sarah S.
Because it's in the name "Software as a service." Warranties are only for products. SAAS is constantly evolving and has a strives to always be working but it would be very hard to guarantee. Plus, product warranties are generally only guaranteed for a certain period of time and SAAS is usually good for the contract duration.
Technology
SaaS Agreement
Connecticut
SaaS agreement and liability limitations?
I am a software developer looking to create a SaaS product. I am looking to create an agreement that outlines the responsibilities and liabilities of both parties involved. I am concerned about liability limitations in the event of a dispute or breach of contract, and want to make sure that both parties are adequately protected.
Thomas L.
I have considerable experience with SaaS agreements. Liability for errors in the software is a specific negotiation between the parties, based on what damages are likely from the errors, and always exclude consequential damages.
Contracts
SaaS Agreement
Florida
SaaS agreement and support services?
I am a software developer who is in the process of developing a new software as a service (SaaS) model. I am looking for guidance on the legal implications of the agreement between myself and my potential customers. Specifically, I am looking for legal advice on the best way to structure the SaaS agreement, as well as the types of support services that should be included in the agreement.
Diane D.
What you need and ask for are extensive, and cannot be given on a question and answer basis on a site like this. I suggest you engage a business attorney to help you with these endeavors.
Business Contracts
SaaS Agreement
Kansas
SaaS agreement and compliance?
I am a small business owner who is considering signing a SaaS agreement with a third party. I am concerned about the legal implications of the agreement, and whether the agreement is compliant with relevant laws and regulations. Additionally, I am unsure of the requirements of the agreement, and what my rights and obligations are as a customer. I want to make sure I understand the agreement fully before signing.
Nicholas M.
These are questions that you should discuss with a Lawyer. Without seeing the content of the contract and understanding the nature of your business, I doubt anyone will be able to provide you actionable advice.
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ContractsCounsel User
SaaS application contract - Business to Business. We are looking for a contract for our startup where we offer SAAS application to clients
Location: California
Turnaround: Less than a week
Service: Drafting
Doc Type: SaaS Agreement
Number of Bids: 5
Bid Range: $725 - $3,500
ContractsCounsel User
Review first contract for startup (pilot for enterprise SaaS)
Location: California
Turnaround: Less than a week
Service: Contract Review
Doc Type: SaaS Agreement
Page Count: 8
Number of Bids: 6
Bid Range: $200 - $2,500
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