Master SaaS agreement: How-to guide

Software as a Service (SaaS) has revolutionized how businesses access and utilize technology. From startups to enterprises, SaaS solutions offer flexible, scalable, and cost-effective alternatives to traditional software models. At the heart of every SaaS engagement lies the master SaaS service agreement, a critical document that governs the relationship between service providers and their clients.

This comprehensive guide delves into the intricacies of SaaS services and the significance of the master SaaS service agreement, detailing their importance, components, and various benefits.

What is Software as a Service (SaaS)?

Before delving into the specifics of the master SaaS service agreement, it's crucial to understand the concept of SaaS.

Software as a Service, commonly known as SaaS, is a cloud-based service where users can access software applications via the internet on a subscription basis. Unlike traditional software models, where users install applications on their devices, SaaS allows for remote access and management, providing updates and maintenance easily.

What is a master Software as a Service agreement?

A master Software as a Service agreement, otherwise called a master SaaS agreement, is a written agreement governing the working relationship between a SaaS provider and its customers. This agreement outlines the terms and conditions under which the SaaS services are provided, including the rights and responsibilities of both parties.

A master SaaS agreement discusses the SaaS provider’s offerings and what the end user or customer company should expect from the provider.

The agreement includes detailed terms and conditions for the customers regarding their control and access over the software while outlining the subscription service and payment model adopted for the SaaS product.

What are the benefits of master SaaS agreements?

A master SaaS agreement acts as a self-help manual for the software service provider to streamline their operations. Implementing a master SaaS contract offers several advantages for both SaaS providers and their customers:

• Clearly defined roles and responsibilities reduce the risk of misunderstandings and disputes between parties.
• Expedites the negotiation process.
• Safeguards the rights of all the parties involved in the contract.
• Foresees potential problems and specifies them in the SaaS agreement in advance.

Are SaaS agreements and licensing agreements the same?

While both SaaS agreements and licensing agreements govern the use of software, they differ significantly in scope and terms:

1. Scope

SaaS agreements primarily focus on providing access to software applications hosted on remote servers with subscription-based pricing models. Licensing agreements, on the other hand, typically involve the purchase of a software license for a specific period, allowing the use of software on-premises or on designated devices.

2. Ownership

SaaS agreements do not transfer ownership of the software to the user; instead, they provide the right to access and use the software. Licensing agreements may grant ownership rights or limited rights to use specific features of the software.

3. Payment structure

SaaS agreements often involve recurring payments based on subscription plans, while licensing agreements may include one-time payments or periodic licensing fees.

4. Maintenance and support

SaaS agreements typically include ongoing maintenance and support as part of the subscription fee, whereas licensing agreements may require separate agreements for support and updates.

Understanding these distinctions is crucial for businesses to choose the right model that aligns with their operational needs and business requirements.

What are the key parts of a SaaS service agreement?

Designing a software services agreement might still be challenging if you’re unaware of the specifics that must be included in your SaaS contract.

Even though the clauses or the content included in a SaaS contract may vary depending on your company and the products and services you offer, a SaaS agreement/contract features the following components:

1. Introduction

Start your software service contract with a brief introduction defining the parties involved, typically the provider (company) and the customer (end-user). This section should outline the agreement's purpose, which is to provide access to the software as a service. It should also mention the document's effective date and highlight the agreement's importance in governing the relationship between the parties.

2. Terms and conditions

The terms and conditions section sets forth the obligations of the service-providing company and its users.

2.1. Services 

This segment details the services provided by the SaaS company. Include the features, purpose, functionality, and any service-level commitments for the offerings.

2.2. Platform access and authorized user 

This section specifies the terms under which the customer can access the platform. It defines authorized users who can use the service under the customer's subscription. The agreement shall detail the procedures for granting and revoking access, ensuring only designated users can utilize the service. This part is crucial to maintain the security and integrity of the SaaS platform.

2.3. Confidentiality

This part outlines the parties' obligations to protect sensitive and personal information. It specifies what constitutes confidential information and sets the terms for its use and disclosure. 

2.4. Proprietary rights 

Explain how the customer company should handle intellectual property rights. Define how the software company should manage the ownership of the service product, and confidential data like passwords.  

2.5. Payment terms

This section outlines the fees associated with the subscription service, including the payment schedule and accepted payment methods. It also addresses the consequences of late payments or non-payment, ensuring clear understanding between the parties.

2.6. Security 

This segment specifies the measures the service provider implements to protect the data and personal information of the customer. This includes physical, technical, and administrative safeguards designed to prevent unauthorized access, data breaches, and other security incidents. The agreement should outline the provider’s obligations in the event of a security breach, including notification procedures and mitigation strategies.

2.7. Termination

This section outlines the conditions for terminating the software service agreement. Termination of an agreement can happen due to reasons such as: 

• Timelines not being met by the software company
• Poor service or operational quality of the product delivered
• Service levels are not met as per the agreement
• Client or company not providing assured support during the project
• Payment defaults 

2.8. Indemnification 

Indemnification is generally a party's promise to hold another party legally blameless—or not accountable—for possible breach or damages in an agreement. So, in this section, you shall mention in detail exactly what kind of breach or losses are not liable in the service contract. 

2.9. Limitation of liability

The section caps the amount that either party can be held liable for under the agreement. This provision is critical in managing the financial risk associated with the use of the service. For example, some SaaS contracts exclude liability for indirect, incidental, or consequential damages and may limit the provider's liability to the amount paid by the customer for the service during a specified period.

2.10. Arbitration

Arbitration is like an out-of-court dispute resolution where an impartial third party, known as an arbitrator, hears evidence and provides a binding ruling. Any disputes between the parties resulting from or connected to the software service agreement are taken into account and resolved in accordance with this provision.

2.11. Assignability

This clause determines whether a party may transfer or assign its rights and obligations under the SaaS services agreement to another entity. Assignability ensures that the integrity of the agreement remains intact even if ownership changes.

2.12. Notices

The notices section specifies how and where official communications regarding the SaaS services agreement shall be sent. It ensures that all parties receive timely and proper notice of important matters, such as changes in terms, termination, or breaches.

2.13. Force majeure

This part states that during unforeseen circumstances that are beyond a party’s control, like natural disasters or strikes, the affected party won’t be liable for not delivering the promised services.

2.14. Modification

This section outlines the process by which the agreement may be amended or modified.

2.15. Severability

The severability clause states that if any provision of the SaaS services agreement is found to be invalid or unenforceable by a court, the remaining provisions will still remain in effect.

2.16. Governing law and jurisdiction

This section specifies which region's laws will apply to the services agreement and which courts shall have authority in the event of a legal dispute.

2.17. Legal and binding agreement

This clause explains that the agreement is a legal document binding all parties to its terms. It emphasizes that the agreement shall be enforceable under applicable law, and all parties must comply with its provisions.

2.18. Entire agreement

This clause states that the document contains all terms agreed upon by the parties and replaces any prior agreements or discussions. It ensures that no other agreements, written or verbal, shall contradict the current agreement.

3. Acceptance and signatures

This final part of the agreement requires the parties to sign the document if they agree to the terms and conditions mentioned in the contract.

Use LegalZoom’s template to create your SaaS agreement documents

SaaS agreements are essential for any business engaging in Software as a Service offering. However, crafting these agreements can be a complex and time-consuming task, especially with various terms and legal clauses involved. Use LegalZoom’s master SaaS agreement provided at the top of the page to get started with your document creation process. 

In case you face any blockers in understanding certain aspects of the agreement, you can always seek the help of our expert attorneys.

Using LegalZoom’s master SaaS agreement template has many benefits: 

1. Avoid complexities in agreement creation

Our comprehensive template circumvents this issue, as it provides predefined sections and clauses that cover the important aspects of a SaaS agreement.

2. Ensure uniformity and consistency 

Our master SaaS agreement template promotes standardization and consistency across all your service agreements. It gives you a good head start to include the necessary clauses and stipulations. This consistency helps in maintaining a uniform approach to contractual obligations, making it easier to manage multiple clients and services.

3. Save time

Using a predefined SaaS agreement template saves time as you don’t have to draft new agreements from scratch for each client. 

4. Tailor the content

LegalZoom also provides the option to customize your document by opting for our subscription plans. Once your document is complete with all the necessary edits, you can download it in .pdf format and easily share it with your stakeholders.

In case you want involved parties to sign your SaaS agreement, you can easily get it signed with LegalZoom’s eSignature services.

Our templates are also device-compatible. You can access it across devices, including desktop, tablet, and mobile. This ensures that you can work on your agreement anytime and from anywhere.

Frequently asked questions

What should be included in a SaaS agreement?

 A SaaS agreement should cover key elements like:

• Scope of services
• Subscription details
• Payment terms
• Intellectual property rights
• Service levels
• Data protection
• Confidentiality clause
• Responsibilities of both parties
• Dispute resolution mechanisms
• Termination conditions
• Clauses related to compliance with applicable laws, access rights, support, and service levels

What is a SaaS service level agreement (SLA)?

A SaaS service level agreement (SLA) is a document outlining the expected performance and service levels between a SaaS provider and its customer. It includes specific metrics for service availability, response times, support, and performance standards. The SLA ensures that the service provider meets the agreed-upon service levels, detailing remedies or penalties for non-compliance. This agreement is crucial for maintaining transparency, managing expectations, and providing a clear framework for service quality, ultimately protecting both parties in the SaaS agreement.

How do I make a SaaS contract?

You can create a SaaS contract by drafting from scratch or by using a free template from LegalZoom. An ideal SaaS contract should contain the following clauses:

• Services 
• Platform access and authorized user 
• Confidentiality
• Proprietary rights 
• Payment terms
• Security 
• Termination
• Indemnification 
• Limitation of liability
• Arbitration
• Signatures

Do you need an EULA for SaaS?

Yes, an End User License Agreement (EULA) is necessary for SaaS to define the terms under which users can access and use the software. It outlines the user’s rights, limitations, and obligations regarding the software, ensuring the protection of the provider's intellectual property rights. The EULA helps prevent misuse and unauthorized distribution of the software, safeguarding the interests of both the service provider and the users. Including a EULA in SaaS agreements enhances legal clarity and compliance for the subscription service.