SaaS agreements, or Software-as-a-Service Agreements, lay out the terms and conditions of a software delivery model; how the relationship between the SaaS supplier and customer is regulated, including terms of access, maintenance, support, and service obligations of the provider and responsibilities of each party.

In this type of model, software and data are centrally hosted in the cloud and users access the software over the internet, usually via a subscription model. Therefore, under a SaaS agreement, no ownership of the software will be transferred to the customer and their right to use the software will end upon termination of the agreement.

Why is a SaaS agreement important?

The SaaS agreement protects the company whose services are being used by outlining its obligations to the customer and holding them accountable for the uses of its software. In turn, SaaS agreements are also important for subscribers as it clarifies the exact software access that clients receive for as long as they’re subscribed to the service.

Any company that decides to license rights to cloud-based software needs to put terms, limits, and liabilities in place. Below we discuss in more detail some of the key clauses SaaS agreements include.

However, it’s not a case of one-SaaS-agreement-fits-all. Companies often require multiple agreements to regulate customer relations on different scales.

Key clauses in SaaS agreements

Whilst every business operates differently and benefits from bespoke terms being, all SaaS agreements must include certain key clauses. These include the maintenance, updates and support obligations of the SaaS provider as well as use obligations and limitations for the client:

• Access rights and users: The number of users that the contract permits and the penalties if the customer exceeds that amount.
• Service level agreements: the induction and training for SaaS implementation and the availability and response times of support.
• Data ownership: Provisions that make clear who owns data uploaded to the service.
• ‌Data security: Both parties’ encryption, backup, and security responsibilities. This clause is vital for SaaS companies that work with clients’ sensitive information.
• ‌License scope: The precise rights and limits the clients receive through the contract.
• ‌Liability: The liability the SaaS company accepts and denies, along with a contractual damage cap.
• ‌Warranties: Performance objectives, the method of service delivery, guaranteed minimum performance and uptime, and any results your service doesn’t promise.
• ‌Pricing and subscription plans: The tier of the subscription, the payment schedule, and the amount the client is expected to pay.
• ‌Term, termination, and renewal: The subscription period, the methods for cancelling, changing, or renewing a subscription, and any penalties for ending the subscription early.

Creating an effective SaaS agreement with appropriate provisions will reduce key risks including limiting the SaaS providers’ liability, ensuring realistic and appropriate service levels, confidentiality protections and legal use of the software. SaaS companies can use these terms to ensure that they retain full ownership of their software while still offering clients useful services.

Additionally, no matter how your SaaS agreement functions, you should have a Terms of Use and Privacy Policy in place for users.