Saas Agreement: Everything You Need to Know
A SaaS agreement is used to define the terms of service, licensing requirements, and other legal terms to clients of Software as a Service (SaaS) companies. 3 min read
Updated November 25, 2020:
A SaaS agreement is used to define the terms of service, licensing requirements, and other legal terms to clients of Software as a Service (SaaS) companies.
Defining SaaS Agreement
SaaS agreements are different from regular software agreements, which usually require large upfront payments for licensing. Updating processes are also simplified by SaaS. With SaaS platforms, the users are subscribers to the software. Their work is often saved in the cloud. The agreement is often based upon a monthly subscription, with the contract renewing after each additional monthly payment. This is somewhat different from an ongoing license. The SaaS agreement should explain the provider's responsibility to make the software accessible to users.
SaaS agreements are usually written with a Click Wrap Agreement, based on the terms the provider chooses. One part of the agreement should detail the maintenance or troubleshooting services that the developers should provide to users. The SaaS agreement also encompasses a Terms of Service agreement. This includes limitations on how the software can be used or accessed. The phrases "Terms of Service" or "Terms and Conditions" are still habitually used within the SaaS agreement. However, the name of this section doesn't matter as much as the terms it contains. Be sure your document contains all unique terms that apply to your business or SaaS apps in general.
- Limitations or restriction
- Billing agreement and policies
A SaaS agreement is typically more comprehensive than a regular Terms of Service agreement; many more conditions govern cloud-based and SaaS services. Have your users accept all of your terms through the use of Click Wrap. Have them do this before they can access account creation, billing details, and other parts of the sign-up process.
What to Add in a SaaS Agreement: Termination
Make it clear to users when their service starts and ends. Include details about user behaviors that could end in their software privileges being immediately revoked. Soffront is an example of a client relationship management company that has a good termination clause in their generic SaaS agreement. It states that a user's access to the SaaS service could be revoked immediately for any failure to abide by the terms of service.
Axosoft's legal documentation provides language the describes when services start and end, and when they will be terminated early, including for nonpayment. A final example is mySalesman. Their general termination clause states that the service agreement ends when both parties choose to do so.
What to Add in a SaaS Agreement: Billing and Payments
It is a good idea to be specific about how much users will pay for your service, when they need to pay, and how they can pay. These can have widely different lengths. Soffront's terms include a description of the payment methods accepted. It also states that the user must have a credit card on file with the company. They mention nonpayment as a means to termination both in the payment section and in the terms of service.
MySalesman's payments section is longer. Since it is a subscription service, it includes language about payment due dates and late fees. Sailpoint's payment policies include provisions for invoices and payment schedules. The company can also charge users for reimbursement of expenses or tax payments. Their agreement is also tailored in terms of billing. Billing is often an area that is not standardized across companies. If your software accepts automatic payments, the service likely terminates on its own when users haven't paid. In that case, you likely need to include less language in the payments section.
If you need help with a SaaS agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.