Software as a Service Agreement

Important Clauses Found in a SaaS Agreement

Different SaaS agreements have different clauses based on their specific industries, products and services. However, some things that are common amongst all cloud-based software agreements include:

• Rights: The agreement should contain a clause to prevent users or third parties from using some components of your software to create their own product. These rights preserve your position as owner of the software even after its purchase by the user. This stops the user from reselling, reverse engineering, and unlicensed modification. Additionally, it should determine how much data can a user access and to what extent. Your agreement must detail the metric and have certain penalties set in place for those who abuse the rights. 
• Customer Service Levels: Most companies pride themselves on prioritising their customers over everything. If you do so, you must let your customers know how you will maintain the ongoing relationship. Will you be available 24/7 to clarify software procedures or queries? How long will it take for you to respond to customer emails? All these questions must be answered. 
• Data Ownership And Protection - This clause is extremely crucial. It details who has the rights to the data that gets entered into the software. It also lists other important information like:
  • How will the licensor protect the users’ data?
  • How often is the data backed up?
  • Where is the data stored?
  • What happens in the event of a data breach?
  • What happens to the data stored after the services are terminated?
• Limits Of Liability - This clause protects you from any potential lawsuits. You must list each and every warranty regarding the software and its usage. 
• Licence Scope - If you want to restrict the licence from being transferred to the subscribers or another person, you must make it clear in the agreement.
• Software Performance Objectives - This clause lets the user know what they can expect from the software you are providing. It should include:
  • Substantial results they can expect from the software.
  • Performance-related guarantees.

• Pricing - Since SaaS is a cloud-based method of providing software to the users, you must include a clause stating in what circumstances can the pricing of the software be updated. It should also include the methods of subscription payments the users can adopt.
• External Service Agreement - This is an agreement between the service provider and its external customers. It outlines acceptable levels of service as well as compensation the customer would receive if the provider fails to provide those services. Therefore, it’s important for providers to be careful when setting a minimum performance level for your SaaS.
• Software Updates And Support - Your customers must know how you roll out updates for the software. Do you offer adequate access to customers during updates and maintenance? Do you provide any support or feedback during the process? If yes, let them know how and where.
• Subscription Models - This clause explains in detail what services are offered under different subscription models.
• Termination And Renewal - This clause states actions that the user must take to terminate their SaaS subscription. It also includes a renewal clause, should they decide to continue with the Saas provider. A termination clause includes what happens when a customer fails to make the payment, breaches the contract, wishes to terminate the subscription. Most SaaS providers have evergreen renewal clauses that automatically renew the contract unless terminated by the user.