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4 Tips for Writing a Good SaaS Agreement

By Tanya Roth, Esq. on March 18, 2013 | Last updated on March 21, 2019

With cloud storage becoming increasingly popular for businesses, many small new SaaS companies are popping up. But some people are setting up low-budget SaaS companies online, without fully addressing the legal issues involved.

Drafting an SaaS agreement can be tricky, since it's a complex agreement. But if your startup doesn't have the funds to hire a lawyer, you'd better be smart about how you draft one of these contracts.

Let's start at the very beginning: What is an SaaS?

SaaS stands for "Software as a Service." It's when a user borrows software instead of actually purchasing it, explains. If the user is a small business, the business simply has all of its employees log on to use centralized software that's already online.

If you're getting into the SaaS business, you'll want to have an iron-clad contract for your users. Here are a few things to think about when drafting an SaaS agreement:

  1. Address ownership of data. It's important to address who owns the data and who can access it. It's equally important to address how the data is to be recovered, in the event that the system fails. A privacy policy should be included in the SaaS agreement, either as a separate contract or as a clause in the SaaS agreement.

  2. Be clear about pricing. Have a clear pricing structure and clearly state what is included, Bruce Cleveland's Rolling Thunder blog suggests. Similarly, state what isn't included in a given pricing structure. The end user should have a very clear picture of what he's getting.

  3. Address techinical issues and integration. Make sure you state who is responsible for technical issues and for integrating the SaaS into the user's business or personal use. If you're running a simple SaaS, then the end user shouldn't have to count on your services too much for overall integration. But when you're in the business of selling an SaaS to whole enterprises, then you may want to specify exactly who is responsible for implementation and training.

  4. Be clear about user limitations and warranties. You don't want the user conducting illicit activities through your SaaS platform. Depending on your product, you'll want to contemplate the types of activity your software could be used for and specifically make the end user agree to its terms of use. The contract should also contain an indemnification clause, in the event that the end user's illegal conduct causes your SaaS company any harm.

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