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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
Firm rated best ADR firm for Wisconsin and won an award for cultural innovation in dispute resolution from acquisition international magazine in 2016 and it was rated "Best of Brookfield" by Best Businesses in 2015. Attorney Maxwell C. Livingston was rated 10 best in Labor & Employment Law by American Institute of Legal Counsel and 40 Under 40 by American Society of Legal Advocates for 2016; he also won 10 Best by American Institute of Family Law Attorneys. He is licensed in Wisconsin in all state and federal courts, and in the 7th Circuit Court of Appeals, wherein he won a landmark decision in McCray v. Wielke.
Richard is a wizard at taking on bureaucracies and simply getting the job done. His clients value his straight-forward counsel and his ability to leverage a top-notch legal staff for efficient and effective results. Richard is a professional engineer, professor of law, and has been named among the top 2.5% of attorneys in Texas by the Super Lawyers®. When he is not driving results for his clients, Richard can be found with his small herd on his Texas homestead.
Experienced attorney and tax analyst with a history of working in the government and private industry. Skilled in Public Speaking, Contract Law, Corporate Governance, and Contract Negotiation. Strong professional graduate from Penn State Law.
I am an attorney admitted in NY, with over 6 years of experience drafting, reviewing and negotiating a wide array of contracts and agreements. I have experience in Sports and Entertainment, Real Estate, Healthcare, Estate Planning and with Startup Companies. I am confident I can assist you with all of your legal needs.
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.
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.
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.