Quality Should Be Your First Consideration

Understanding SaaS agreements: Tips for contract review

On Behalf of | Nov 1, 2023 | Contract Law

Increasingly, small and medium companies recognize the value of Software as a Service (SaaS) when it comes to meeting most of their technological needs. SaaS business software subscriptions can make it easy for a company to scale up and thrive, without investing in their own IT department and systems.

However, that means you have to manage those contracts – and it’s important to review your contract carefully with every renewal.

What are some of the most critical issues to review?

Attention to detail with your SaaS contracts can help you mitigate the risk of misunderstandings and disputes that can ultimately turn litigious. When both parties know what’s expected of them, that can make accountability easier. With that in mind, here are some things to examine:

  • Focus on defined terms: Words in a contract don’t always mean what you think they mean. If the contract takes the time to spell out a term’s definition, make sure that you understand the meaning.
  • Look at service level agreements: Consider things like uptime guarantees and support response times to make sure they’re realistic given your industry and needs.
  • Review their security processes: You would be remiss (and possibly liable) if you aren’t well-informed about how your company’s data is handled, stored and secured and there’s a breach. Make sure that your security requirements are being met.
  • Termination terms: What if you’re unhappy with the SaaS as a whole? What if it simply ceases to have the flexibility you need to expand? What if you’re simply not a fan of their customer service and cooperation? You need to know what exit strategies you have.
  • Dispute resolutions: Are there clauses in the contract that dictate how disputes have to be resolved? Is the jurisdiction reasonable? Are the terms something you can accept? You don’t want to find out that you’ve signed a lopsided agreement that gives you little recourse when there’s a problem.

You do not want to simply “click-through” an SaaS agreement the way that so many people do with licensing agreements. if there’s any conflict in the future, that could put your company at a serious disadvantage. Seeking legal guidance can help you to make sure that all the contracts you have in place are clear and balanced.


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