SaaS Contract Writing Tips

I am going to explore a topic that a lot of people have been asking me about, that being legal and contractual issues regarding SaaS. Your SaaS contract, which consists of three different levels of legality and terms of service, is very important, and as such, I’d be remiss if I didn’t at least touch on these.
(I want to publically thank the legal guys who have put up with my probing, as I’m not a legal eagle myself…  Thank you for ensuring that I have accurately covered the most important key points).

That said, let’s talk about SaaS contracts

#1 – Clear Definitions

In the early stages of drafting your contract, make sure that your points are clearly defined. These points include basic items such as the mission statement of your company and your SaaS design.

State the purposes, goals and functions of the software, leaving no room for interpretation or loopholes.This is important, because if your wording isn’t clear and concise, then misuse of the software is inevitable. Not only that, once the misuse is discovered, it cannot be fully prohibited or censured. Failure to function within unintended limits can be incorrectly (but legally) cited as incompetence in the contract.

Microsoft  recently learned this the hard way, as did Google, when it came to their cloud drive and email systems. Companies were, before such functionality was officially made available, using inboxes as storage mediums to mount as remote drives. When files became corrupted or were lost, these companies were legally blamed – despite the systems not being intended for this. But, the real problem was that their contracts and user agreements did not specify that the systems were exclusively intended for this use. Learn from this mess and clearly state all system purposes in your contract.

#2 – Cover Your Obligations

Specify what obligations your company takes on:  by way of support, compensation and maintenance. If you do not specify, in clear and legal terms, what your responsibilities are, then you can end up in a lot of trouble.
Make sure that you draw the line where your responsibilities start and stop.  Sometimes users cause a malfunction and they are stuck  ‘up a creek without a paddle.’ You are not obligated to fix everything that goes wrong. This may sound cruel but it’s business at the end of the day.

#3 – Cover User Obligations

Just as you need to specify your own obligations as service provider, so must you make it clear that the user takes on some legal responsibilities by using your services.
Products that can be harmful if misused must be labeled so.  Users are obligated, by law, to follow directions.  Every service should also have the legal consequences of misuse spelled out in the contract. This will mean that malicious use of the service by one user against others actually incriminates them -and not your own company.

I have listed the key points a company must address when creating a SaaS contract.  In the next few posts, we’ll cover the finer details of contract creation!

Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.