Basics for SaaS Agreements
Are you thinking of starting a Software as a Service (SaaS) business?
It’s important to set expectations with users and have clear terms on, at a minimum, what service is to be provided, fees, refunds and warranties.
This article provides some considerations on how to mitigate legal risks and maintain relationships with your users. It is not intended to be legal advice and you should reach out to us directly if you require assistance with your SaaS agreement.
How do website T&Cs differ from SaaS agreements?
As an initial point, you may wonder why you cannot simply use website T&Cs and include a few extra clauses?
Generally, website T&Cs often only cover the agreement between users and the website operator, and are binding on all visitors to the website. This means they often will not include payment by the user or services rendered by the website.
SaaS Agreements on the other hand will only be entered between the software operator and their users who subscribe. They will therefore include provisions about payment, refunds, and warranties for the services provided by the website.
You can seek to combine these if you wish but you might find this becomes overly complex.
What are some common risks with SaaS businesses?
1. Issues with payments: Due to the global accessibility of the internet, anyone around the world may seek to subscribe to your SaaS offering. This means that there may be problems with exchange rates and taxes such as GST. It’s often helpful to engage a reputable third-party payment company to handle payments between you and your customers.
2. Protecting your software: You should make it clear that you own all the IP rights to your software and any related content. This provides legal protection if anyone seeks to take the code from your software and use it to set up their own business using your software.
3. Security and data protection: If you are dealing with sensitive information or data that users may provide to you, it is important that you consider your obligations under privacy legislation. Be aware that you users may not always use your software as intended so you may inadvertently receive sensitive personal information (for example, via information users provide to chatbots). Your agreement should include clear restrictions on this and seek warranties from users that they own or have right to any data provided.
4. Unfair Contract Terms: A SaaS agreement will nearly always be a standard-form contract that users cannot negotiation. This means it will be generally subject to the Unfair Contract Terms regime as part of the Australian Consumer Law (ACL). You should consider when drafting your SaaS agreement whether the terms of the agreement may be deemed ‘unfair’. Please see our article on Unfair Contract Terms for more information, or reach out to us if you need further consultation on your SaaS agreement.
What are some key clauses I should include in my SaaS Agreement?
The below clauses will generally be useful to include in a SAAS agreement:
1. Description of your service: it is a subscription model or pay as you go model, it is important to outline the parameters of your services. This will help to avoid disputes over whether or not you provided what the user expected. For example, make it clear if there are different levels of subscription services, which provide different levels of services.
2. Payments: the agreement should clearly state what fees will be payable by users, the frequency of payment, invoicing requirements, and integration of any third party payment providers.
3. Refunds: The refund clauses should set out on what terms refunds will be available to users of your SaaS platform. These terms do not have to be overly specific but should ensure that users have a reasonable opportunity to obtain a refund where necessary. Most Australian SaaS companies will be captured by the ACL, so for those persons any terms for refund should be in accordance with the ACL.
4. Non-Circumvention Clause: If your platform supports dealings between multiple third-parties (i.e users of the services and supplier of the services), a non-circumvention clause may be important to avoid users and suppliers diverting opportunities from your software. This clause should set out rules that prohibit your third-party users from engaging with one another outside your platform. If they do so, you should reserve the right to cancel their account with your platform. This will preserve the business value of your platform and prevents your users from taking business away from the platform.
5. Termination: Especially when offering subscription services as part of the SaaS platform, it is necessary to set out terms relating to termination that are fair for both parties. For example, either the SaaS provider or user of the platform services may terminate the agreement with 30-days written notice. In cases where users may be in material breach of your SaaS agreement, you should reserve the right to terminate their subscription.
If you are looking for commentary on website T&Cs generally you may be interested to read our earlier blog post on website T&Cs.
If you would like to discuss your SaaS agreement with a lawyer from Dexterity Law, please reach out to contact us here.
