6 must-have clauses to include in your SaaS terms and conditions to protect your business
In this blog, we will explore key clauses that should be included in your SaaS terms and conditions to safeguard your business interests. By understanding the benefits of these clauses, you can draft effective SaaS terms that protect your business while building trust and cultivating strong business relationships.
Essential clauses to consider when creating your own SaaS terms and conditions
Let's explore the essential elements that should be included in your SaaS terms and conditions:
1. Scope of the software
When drafting your SaaS terms, it is crucial to provide a clear and detailed description of the software you will be supplying. This sets clear expectations from the beginning of the relationship with your customers and minimises misunderstandings. This section should include all relevant information about the licensed software, including any applicable specifications.
If you will offer additional support services like installation, maintenance, or bug fixing, clearly outline these services within the SaaS terms and conditions.
By being transparent and upfront about the software and related services, effective communication is established, ensuring that all parties are on the same page from the outset.
2. Data ownership
Data ownership and security are paramount concerns for businesses, especially when entrusting a third party to store their data on servers outside of their direct control. Therefore, it is essential that the SaaS terms and conditions explicitly state that the customer retains full control over their own data.
Including a comprehensive section on data protection, confidentiality, and compliance with applicable laws, such as the UK GDPR, demonstrates a service provider's commitment to safeguarding customer data. Users should feel confident that the information stored on the SaaS platform is securely protected and will not be accessed or shared without their explicit authorisation.
By clearly outlining how customer data will be handled, stored, and protected, you build trust and alleviate concerns regarding data breaches or unauthorised access. This clause reassures customers that their sensitive information is in safe hands.
For more information about compliance with UK data protection laws, read this checklist.
3. Intellectual property rights
Including a clause that clarifies the ownership of intellectual property rights (IPR) is fundamental in SaaS terms and conditions. For service providers, it allows you to retain ownership of your software, content, or data, ensuring that your most valuable assets are protected. It also enables you to license your software to customers while establishing restrictions on customers from attempting to modify, decompile, or distribute your IPR without your consent. Customers, on the other hand, benefit by understanding the limits of their usage rights and avoiding potential legal issues.
In your SaaS terms and conditions, it is important to also address the ownership of new intellectual property that arises through the use of the software. For example, if a creative agency uses a SaaS platform where designers utilise their own intellectual property. If the software generates new intellectual property based on the user's input, you should consider clearly defining within the SaaS terms and conditions who owns that resulting intellectual property. This will ensure that there is a fair and transparent ownership structure for newly-arising IPR.
For more in-depth guidance about mitigating risk when it comes to intellectual property in software contracts, check out this guide.
4. Price and payment
As the old saying goes, "cash is king." Whether it is service providers wanting to ensure they are paid for their software or a customer aiming to manage their budget effectively; pricing terms are imperative for all parties in SaaS terms and conditions. Your payment terms should specify the amount payable by the customer, the frequency of payments, and the consequences of late payments. This protects your business from misunderstandings and ensures a transparent payment process.
For more guidance about the different types of SaaS pricing models, check out this blog.
5. Service levels
Your SaaS terms and conditions should outline any service level agreements (SLAs) that a service provider is committed to delivering when it comes to the software's performance.
Your reliability will set you apart from your competitors and your SLA will set specific metrics to ensure that you are dependable when it comes to providing a good user experience. One important metric is uptime, which measures how long the service is available and operational.
For example, if a SaaS provider guarantees 99.9% uptime, they strive to ensure the service is accessible and functioning properly with minimal downtime for most of the time. However, with a 99.9% uptime guarantee, customers can expect 0.1% downtime which is approximately 43 minutes of downtime per month or 9 hours per year.
Understanding service levels helps both customers and providers set clear expectations and minimises interruptions to business operations. If you are looking for an example of an online SLA that is accessible to the public, check out Microsoft's Service Level Agreements for online services.
6. Limitation of liability
It is important to clarify the consequences if something goes wrong. While neither party wants to envision a negative outcome, it is crucial for both parties to protect themselves from potential liabilities that may arise.
As a service provider, when drafting SaaS terms and conditions, you should consider potential issues or the types of damages that could arise if you are unable to comply with the SaaS terms and include limitations of liability in these instances.
It is common for financial responsibility to be capped under the agreement for any losses incurred by the other party, along with disclaimers of certain types of losses such as direct, indirect, incidental, or consequential damages. Take a look at our SaaS terms template for an example of a limitation of liability clause.
As you embark on drafting or revising your own SaaS terms and conditions, keep these key considerations in mind to protect your business and your software.
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