If you offer a software-as-a-service (SaaS) product, you need to develop a SaaS agreement or SaaS contract that lets users know how they can and cannot interact with your service.
This article explains what a SaaS agreement is, shows examples you can use to get started, and provides a handy checklist to help ensure you address all topics that must be included in your contract.
What Is a SaaS Agreement?
A SaaS agreement is a legal contract between an application’s developers and its users. It lays out the terms and conditions that outline how the SaaS application is accessed and used.
This contract usually includes a license agreement, reseller agreement, and subscription agreement, as well as a service-level agreement — which defines the level of service a customer can expect from the SaaS provider, the metrics by which these expectations are monitored, and any remedies that will be carried out if these service levels are not adequately met.
Many SaaS providers have a terms of service or terms and conditions page, which serves as their SaaS agreement. This is usually nothing more than a simple SaaS agreement under different names, as terms and conditions are so versatile.
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Do I Need a SaaS Agreement?
You need a SaaS agreement if you’re delivering software and data from a central location that your customers access through the internet, rather than providing a local download or installation. This is typically done through a subscription model in which the customer:
- Will not receive a physical or downloadable copy of the software
- Will not have any ownership in the SaaS application
- Will forfeit the right to access and use the application if the SaaS agreement is terminated
Having a SaaS agreement helps you outline rules of download and use when accessing your service, which protects your interests and helps establish documentation in the event of a user dispute.
SaaS Agreement Examples
Let’s look at how other companies lay out the terms and conditions for their services.
Asana Terms of Service
Asana’s terms of service double as their SaaS agreement:
Note that before diving into the terms themselves, the document lays out a few definitions intended to help the reader comprehend the terms more fully. Most SaaS agreements include a section like this. Asana, for example, specifically defines:
- “Service” as the tools it delivers via its mobile application
- “Websites” as every one of its sites, including www.asana.com, wavelength.com, blog.asana.com, and community.asana.com
The SaaS agreement also lays out three types of users:
- “Site Visitors” are those who use the Websites.
- “Free Users” are those who use the free version of the Asana Service.
- “Subscribers” are those who use the Service as part of a paid subscription plan.
After defining key concepts and terminology, Asana includes a disclaimer alerting readers to the possibility of updates and changes to its Terms.
The document then sets out the Terms and lists a total of 15 sections, covering areas like:
- eligibility and scope
- account registration and use
- user content and feedback
- licensing and acceptable use
- privacy
- warranties and limitations of liability
- indemnity
- third-party usage
- mandatory arbitration, and more.
Mailchimp’s Terms of Use
Mailchimp’s Standard Terms of Use contains 40 sections, grouped under six categories, including Account, Payment, Rights, Rules and Abuse, Liability, and Other Important Stuff.
Like Asana, Mailchimp lays out key definitions before delving into the Terms. For example, it defines its “Service” as a collective reference to the App (defined as the online marketing platform provided) and the Mailchimp Site — including www.mailchimp.com, www.tinyletter.com, www.mandrill.com, and any other website or mobile application owned, operated, or controlled by Mailchimp.
A helpful feature on Mailchimp’s Terms page is a sidebar that allows readers to navigate the six overarching sections of the agreement.
SaaS Agreement Checklist
While SaaS agreements will vary according to your business and product offering, the following elements are crucial to include in any SaaS contract:
- Start and end dates. The start date — also known as the effective date or the commencement date — is the date that your SaaS subscription agreement officially goes into effect and the subscription becomes available for use to the customer.
- Billing and payments. Payment terms inform users about how much they need to pay, when, and how. This section addresses how often billing will occur for a SaaS subscription. Most subscriptions offer monthly, annual, or one-time purchase options. Semi-annual and multi-year billing are also possibilities.
- Licensing terms. SaaS providers will assign a customer a license to use the service upon purchase. Large-scale SaaS purchases usually include an assigned number of licenses that can be distributed throughout an organization. SaaS licensing agreements must be drafted such that the license is for the service(s) provided, not the software. Providing licenses for the software risks users reverse engineering your product and profiting off your hard work. A robust SaaS end user license agreement will help you avoid such risks.
- Warranties. You must specify whether you include or disclaim any warranties. For example, you might offer a general warranty concerning satisfactory services while mentioning that there’s no guarantee your application will be error-free at all times and refusing to take responsibility for misuse of your services.
- Privacy. While you can include privacy terms in your SaaS agreement, you must comply with the California Online Privacy Protection Act (CalOPPA) if you’re doing business in the United States. This makes it obligatory to include the word “privacy” in the agreement. As a result, many companies choose to provide a separate privacy policy. For example, Mailchimp includes a brief section titled “Privacy Policy” in its Terms of Use but has a separate, more detailed policy page as well.
- SLA terms. A SaaS service-level agreement (SLA) lays out the specific services provided as well as rules for using them. It includes support services, software maintenance services, and terms regarding the hosting of SaaS software and data. A SaaS service agreement might also outline remedies or penalties for downtime, such as monetary compensation or measures taken to limit damage to users.
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