Saas License Agreement

SaaS License Agreement

Draft a commercially balanced SaaS License Agreement governing cloud-based software access, data custody, service performance, and subscription payment.

Quick Start

1. Gather party names, jurisdictions, addresses (licensor + licensee)
2. Confirm deal terms: pricing model (per-user/tiered/consumption), fees, billing cycle, term length
3. Identify technical scope: platform description, modules, API access, usage limits
4. Note SLA commitments (uptime, support tiers) and data/privacy requirements (GDPR, CCPA, HIPAA)
5. Search uploaded documents for term sheets, SOWs, or prior drafts — use concrete terms over placeholders

Core Sections

1. Title Block & Preamble

• Title: "Software as a Service License Agreement"
• Parties with full legal names, jurisdiction, addresses
• Effective Date (specific or "date last signed below")
• Recitals establishing access-based (not ownership) relationship

2. Definitions

Define each term self-contained (no circular references):

• Software/Platform — SaaS app(s), features, interfaces, updates; browser/mobile/API delivery
• Services — access + hosting, maintenance, support, implementation, training
• Subscription Term — Initial + Renewal Terms; distinguish from Effective Date
• Authorized Users — employees, contractors, affiliates tied to pricing limits
• Customer Data — all licensee-uploaded/input/generated info; remains licensee property
• Confidential Information — both parties' non-public business/technical/financial info
• Subscription Fees — recurring charges, distinct from one-time fees

3. License Grant & Restrictions

Grant: Non-exclusive, non-transferable, non-sublicensable access right during Subscription Term for internal business purposes. Frame as access license, not sale.

Scope controls — match to pricing model:

• Per-user: max count, unique credentials, no sharing
• Usage-based: metrics, allowances, overage rates
• Module-based: included features, add-on process

Restrictions: No reverse engineering; no modification outside config; no resale/rental/service bureau use; no unlawful use; API subject to specs and rate limits; affiliate access requires separate terms; all rights not granted are reserved.

4. Fees & Payment

• Fee structure per deal (flat/per-user/tiered/consumption)
• Billing cycle (monthly/annual in advance)
• Payment terms: Net 30 (enterprise) or immediate (SMB)
• Price adjustments: 30–90 days notice; cap annual increases if negotiated
• Taxes: licensee responsible except licensor's income taxes
• Late payment: 1.5%/month or max legal rate; suspension after notice + 5–7 day cure
• Fees non-refundable except as expressly provided

5. Term & Termination

• Initial Term: specific dates or duration from Effective Date
• Auto-renewal: successive periods; non-renewal notice 30 days (monthly) / 60–90 days (annual)
• Termination for cause: material breach + notice + 15–30 day cure; immediate for non-payment (post-cure), security threats, IP violations
• Suspension vs. termination: suspension = temporary; termination = permanent
• Post-termination: cease access; return/destroy confidential info (with certification); 30-day data retrieval window then deletion; surviving provisions (payment, confidentiality, IP, liability, indemnification, disputes)

6. Intellectual Property

Require preservation of proprietary notices. Licensee must report known third-party infringement.

7. Confidentiality & Data Protection

Confidentiality: Same-degree-of-care standard (never less than reasonable); need-to-know only; standard exceptions (public knowledge, prior possession, independent development, compelled disclosure with notice). Survival: 3–5 years; indefinite for trade secrets.

Data protection: Reasonable administrative/physical/technical safeguards; define controller/processor roles; address data subject rights, cross-border transfers (SCCs), breach notification (24–72 hrs). Reference DPA as exhibit if GDPR/CCPA/HIPAA applies.

8. Warranties & Disclaimers

Affirmative:

• Licensor: authority to license; no third-party conflicts; software performs per documentation; professional service standards
• Licensee: authority to contract; rights to uploaded data; legal compliance

Disclaimers (CONSPICUOUS FORMAT): Disclaim all implied warranties (merchantability, fitness, title, non-infringement). No guarantee of uninterrupted/error-free operation.

9. Limitation of Liability

Draft in CONSPICUOUS FORMAT.

1. Consequential exclusion: Neither party liable for indirect, incidental, consequential, special, or punitive damages regardless of theory
2. Aggregate cap: Fees paid/payable in 12 months preceding claim
3. Carve-outs: Payment obligations (excluded); confidentiality breach (2× annual fees); indemnification (own terms); gross negligence/willful misconduct/fraud (unlimited); statutory minimums (unlimited)

10. Indemnification

Licensor indemnifies for: third-party IP infringement claims from authorized use.

• Remedies: (a) obtain continued-use rights; (b) modify/replace non-infringing; (c) terminate + pro-rata refund
• Exclusions: unauthorized modifications/combinations; non-compliant use; continued use after fix provided

Licensee indemnifies for: Customer Data claims (IP, privacy, unlawful content); use violating agreement/law; compromised credentials.

Procedure (both): Prompt written notice; reasonable cooperation; indemnitor controls defense/settlement (no fault admission without consent).

11. Service Levels & Support (if applicable)

Uptime SLA:

• Measure monthly; exclude scheduled maintenance (24–48 hrs notice), force majeure, ISP/DDoS, licensee issues
• Credits: request within 30 days; applied to future invoices; sole remedy
• Persistent failure (3+ consecutive months below target) may be material breach

Support tiers: Sev 1 Critical (1 hr) → Sev 2 High (4 business hrs) → Sev 3 Medium (1 business day) → Sev 4 Low (2 business days). Excludes custom development, on-site assistance, third-party integrations.

12. Compliance & Audit

• Licensee complies with applicable laws (export controls, data protection, anti-corruption)
• Audit: max 1×/year; 10–15 business days notice; primarily via system logs
• Non-compliance: retroactive payment at current rates; overage >5% → licensee reimburses audit costs

13. Governing Law & Disputes

• Governing law: licensor's home state; exclude conflict-of-law and CISG
• Choose litigation (exclusive jurisdiction) OR arbitration (AAA/JAMS, single arbitrator, binding)
• Pre-dispute: 30-day good-faith executive negotiation
• Equitable relief available for IP/trade secret/confidentiality without waiving arbitration

14. General Provisions

15. Signature Blocks & Exhibits

Signature blocks (name, title, date) for each party. Attach labeled exhibits with order of precedence: SLA, Pricing Schedule, DPA, Acceptable Use Policy.

Pitfalls & Checks

• Frame as access-based license throughout — never imply sale or ownership transfer
• Disclaimers and liability caps must use CONSPICUOUS FORMAT (bold/caps) for enforceability
• Adapt data protection to the specific regime (GDPR/CCPA/HIPAA) — avoid generic language
• Mark uncertain legal citations with [VERIFY]
• Maintain defined-term consistency: capitalize throughout; verify every defined term is used and vice versa
• US-focused template — flag jurisdiction-specific enforceability concerns
• Use plain language; avoid archaic legalese ("witnesseth," "hereinafter")