Software-as-a-service (SaaS) is experiencing explosive growth in France: in 2023, approximately 61% of software Revenue was generated through SaaS. It’s important for SaaS providers to draft detailed agreements to ensure optimal service and protect themselves in the event of a Dispute, technical problem, or security breach.

In this article, we’ll discuss the importance of SaaS agreements, key clauses to include, and the provider’s contractual obligations as they relate to customers. We also address the difference between a SaaS agreement and a software license agreement.

Key takeaways

• A SaaS agreement is a Legal contract binding a SaaS provider to its Customer.
  
• A SaaS agreement gives temporary access to software hosted in the cloud. A software license agreement involves installing software on the Customer’s Server.
  
• It’s mandatory to execute a SaaS agreement as soon as a Business’s software processes or collects personal data.
  
• In the agreement, the Business must define technical Terms as well as the service being offered, guarantee General Data Protection Regulation (GDPR) Compliance, and include a data transition plan.
  
• The Business must also include several necessary clauses addressing Terms of Use, subscriptions, performance, security, availability, and termination.
  

What is a SaaS agreement?

A SaaS agreement is between a SaaS provider and its Customer. It sets Terms of Use for the service and defines the relationship between the two parties. A legally binding document, the SaaS agreement protects the Buyer and the provider’s interests while defining the various stakeholders, including the Developer, publisher, host, insurer, trainer, and User.

What is the difference between a SaaS agreement and a licensing agreement?

A licensing agreement provides the Customer with a copy of the software and the right to install it on their own Server, typically for an indefinite period. A Service Agreement grants the Customer temporary and nonexclusive access to online software. The Customer agrees to a Subscription to use the service.

In contrast to a licensing agreement, a SaaS agreement assigns maintenance and technical Support costs to the provider. The software is hosted in the cloud and does not require installation.

Are SaaS agreements mandatory?

In France, drafting a SaaS agreement is mandatory if a Business collects, hosts, or processes personal data within Europe. Most SaaS solutions transfer personal data between multiple third-party infrastructures or require an email address, name, or other identifier to log into a service.

These solutions must Comply with the General Data Protection Regulation (GDPR). SaaS agreements must clearly define each party’s responsibilities for data management. They must also specify processing and security procedures, and storage Location.

What are the key points in a SaaS agreement?

SaaS agreements are primarily designed to avoid ambiguities affecting the supplier and Customer business relationship. As a result, it’s important to include the following:

• Precise definitions of important Terms related to the service offered, such as “solution,” “data,” “software,” “User,” and “provider”
  
• Detailed service descriptions, including the guaranteed levels of service and Support, Subscription duration, and the software’s purpose
  
• Guaranteed GDPR Compliance
  
• Detailed data transition plan, since the Customer has the right to retrieve their data and Transfer it to a new Service provider after agreement termination
  

What must a SaaS agreement include?

The key clauses to include in a SaaS agreement are as follows:

• Agreement purpose and scope: It’s important to clearly define what the offer includes, including proposed features, services, and modules, and available features, services, and modules. usage limits must also be addressed, such as the number of users authorised and the maximum volume of data to be processed.
  
• Terms of Use: This clause defines the framework within which the service can be used and lists authorised and prohibited uses.
  
• Agreement duration: Businesses must specify an agreement’s effective date, its duration (i.e., fixed or indefinite), the minimum commitment (if any), and renewal procedures.
  
• Subscription Terms: It’s important to note price, Payment conditions and frequency, additional costs, and consequences if Payment is not made.
  
• Guaranteed level of service: Often formalised by a Service Level Agreement (SLA) in the appendix, this section contains quantifiable and verifiable performance indicators such as availability rate, defect resolution time, response time, and penalties in the event of a breach.
  
• Data security: Businesses are required to specify the technical measures used to secure users’ personal data and prevent any risk of loss, corruption, or Fraud (e.g., encryption, traceability, access, backups, audits). Businesses must also inform customers of the Location of data and the recovery plan in case of disaster.
  
• Data processing: customers must be aware of the means used to Process and store their personal data, the subprocessors involved, and any potential transfers outside the European Union (EU).
  
• Intellectual property: This clause clarifies that the publisher retains intellectual property ownership of the software, infrastructure, features, and usage data. It also guarantees that customers retain ownership of the data that they Integrate or generate using the software.
  
• Service availability and guaranteed updates: Businesses must inform customers about when the software is accessible, maintenance times, and update frequency.
  
• Customer Support: Businesses must specify the type of assistance provided during the agreement, contact information for Support, Support operating hours, incident response and resolution times.
  
• Limitation of liability: Businesses can use this clause to define the limits of their responsibility within the agreement. They must include the warranties provided, as well as financial caps proportional to the risks incurred by using the software.
  
• Potential Scalability of the service: A Business’s SaaS solution can evolve. It’s important to include a clause describing the notification process and change management.
  
• Agreement termination: Businesses must outline the conditions, Terms, deadlines, and consequences of termination, in compliance with the EU’s Data Act.
  
• Data reversibility: All SaaS providers must guarantee the return and migration of data to another Service provider at the end of the agreement. Businesses must, therefore, inform customers about recovery format and deadline, the cost of reversibility, technical Support provided, and permanent deletion of data after recovery.
  

Finally, if a SaaS solution integrates AI Functionality, it’s important for Businesses to include a clause in their SaaS agreement governing data usage, model training, and liability in the event of damages. A Legal professional will be able to provide advice on drafting an agreement, adapting it to a Business’s offerings and specific situation.

Streamlining SaaS management with Stripe

Streamlining SaaS service management is possible with tools such as Stripe Billing and Payments. Here’s a closer look at how these solutions can help your Business manage SaaS at scale.

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