6 Things Your Customers will Negotiate in Your Software Sales Agreement

If you’re selling software to larger organizations, chances are the legal department needs to get involved to negotiate some specific provisions in your software license or SaaS agreement (depending on what kind of software you sell). The key here is to make sure you are protected, while still coming to an amicable agreement with your customer.

This post will give you a high level overview of 6 key provisions that your customers are likely to negotiate with you on.

  1. Data Privacy and Information Security – Probably one of the most important parts of a software agreement these days – this section outlines how you are approaching data privacy and information security for your software – including data breach policies, redundancy and backup, high availability, disaster recovery, etc. Some of your customers may have specific data privacy regulations (such as GDPR, CCPA, etc.) that they need to follow – and in turn, as a vendor, you must follow as well. Expect some negotiation in this section, along with an additional agreement (Business Associate Agreement, Data Processing Agreement, etc.)
  2. Intellectual Property Rights – Your customer is using your intellectual property, which is the software itself, and you may be taking inventory of some of theres. This section should outline who owns what intellectual property, and what rights are being licensed over. Your customer may negotiate that some aspects of the software are ‘work made for hire’ and therefore owned by the customer. Make sure you iron out who owns what here, so that your customer doesn’t end up owning your software.
  3. Representations and Warranties – This essential section outlines the promises being made by each party that they are indeed able to enter into this agreement. Further, this section outlines the warranties you as the SaaS provider are making to the customer in terms of protections, data security, etc. Generally a software company tries to disclaim all warranties, but your customer may demand that you insert specific provisions that protect their best interests.
  4. Indemnification – This section is often negotiated, and outlines how you and the customer are indemnifying each other from contract breaches and third party claims. Enterprise customers generally want you to remove any indemnity clause – but it’s important that you negotiate something that protects you.
  5. Limitations of Liability – This essential section limits liability for you and your customer from claims, and can set a monetary limit as to how much can be recovered (such as the total price of the contract) in case there is a breach. Customers are likely to negotiate on limits.
  6. Insurance – Your agreement can outline insurance requirements both from you, or for your customer – and what kind of minimum coverage either of you should have. Your customers may demand that you have a higher insurance policy that protects them in case something happens. Some customers may ask that you add them as additional insured under your policy.

Let us Help

This post is just a high level overview of terms your customers may negotiate in your software sales agreement.

There are many more nuances and specifics around this, and you should have an experienced attorney help you through it to make sure you and your customers are protected.

Kader Law can help you draft a solid Enterprise SaaS sales agreement, review incoming MSA’s, and negotiate for you. If you’re interested, feel free to contact us.

This post is not legal advice, and does not establish any attorney client privilege between Law Office of K.S. Kader, PLLC and you, the reader.