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

Category	Owner	Notes
Software, updates, derivatives	Licensor	Includes features from licensee feedback
Customer Data	Licensee	Licensor gets limited processing license
Custom code by licensor	Licensor	Licensee gets use license within Services
Licensee-specific configs	Negotiable	Default: licensee property
Feedback/suggestions	Licensor	Unrestricted use, no compensation

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:

Availability	Credit
99.0–99.5%	5% monthly fees
98.0–99.0%	10% monthly fees
Below 98.0%	25% monthly fees

• 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

Provision	Terms
Assignment	Consent required (not unreasonably withheld); M&A exception; unauthorized = void
Amendments	Written, signed by both
Severability	Court modifies to minimum extent; sever if not possible
Notices	Email (delivery confirmed), courier, or certified mail
Entire agreement	Supersedes prior understandings; establish exhibit precedence
Relationship	Independent contractors
Force majeure	Excuses performance; terminate if persists 30–60 days
Counterparts	Electronic signatures valid

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")