When selling your Software-as-a-Service (SaaS) products, your enterprise customers may want to negotiate, redline, and push back on your contract. Some of their asks are reasonable, but there should be some clear non-negotiables. This isn’t about the business terms, how many seats you’re selling, or your price – but rather provisions that protect your company, and save you from liability.
This post will give you an overview of 8 non-negotiables of your SaaS agreement.
- Use Restrictions – This section outlines how the customer is restricted from using the application – including sub-licensing, hacking, reverse engineering, or otherwise using your SaaS for illegal operations. There should be no exceptions to this section, and you should clearly lay out what your customer is NOT allowed to do.
- Intellectual Property Rights – Your customer is using your intellectual property, which is the SaaS 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. Some customers may mistakenly think that they are purchasing a “work for hire” – which signs over the intellectual property rights to your SaaS. You want to make sure that it is abundantly clear that you are a SaaS platform, and you’re merely licensing the software – not giving them title to it.
- Indemnification – This section is sometimes negotiated, and outlines how you and the customer are indemnifying each other from contract breaches and third party claims. Different types of entities have different requirements for indemnification. Stand firm in what you are indemnifying your customer for, and what they are indemnifying you for – including any potential suits because of their negligence.
- 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 of contract of any type. Some customers may want no limitations, but stand firm in negotiating and setting a clear amount here.
- Term and Termination – Your agreement should outline how long the contract runs, and under what circumstances and procedures can your agreement be terminated or renewed. Some customers may negotiate a way to terminate the agreement before their term is up.
- Choice of Law – This section in the “Miscellaneous” section outlines what jurisdictions laws apply to your agreement. If you are a Delaware Corporation, consider keeping the choice of law Delaware. Your customers may want to negotiate that the choice of law is their home state – which would not be beneficial to you.
- Arbitration – Most SaaS companies have binding arbitration built into their agreements. Your customers may request that you waive binding arbitration. Have internal discussions about how your business approaches conflict resolution, and stand firm with your choice.
- Data Privacy and Information Security – An increasingly important part – this section may also come as an Exhibit, and outlines how you are approaching data privacy and information security for your SaaS application – including data breach policies, redundancy and backup, high availability, disaster recovery, etc. Some customers may want very stringent information security standards in the agreement. Be sure that you are only agreeing to what you can actually deliver, and do not agree to anything you do not have systems in place for.
Let us Help
This post is just a high level overview of the non-negotiables of your SaaS agreement.
There are many more nuances and specifics around this, and you should have an experienced attorney help you through negotiations to make sure you 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.