What is SaaS agreement? Complete how-to guide in 2025

Dylan Tao

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May 14, 2025

A SaaS agreement is a legal contract between a software provider and a customer that outlines the terms for using cloud-based software. The agreement defines responsibilities, user rights, data handling, and service expectations.

1.2 Why It Matters for SaaS Businesses

A strong SaaS contract minimizes risk, builds trust, and supports scalable growth. It helps protect your business against legal disputes, outlines service obligations, and ensures compliance with data protection laws. For B2B SaaS agreements, where clients expect enterprise-grade assurances, having a well-drafted contract is crucial to closing deals and avoiding liability.

1.3 Who This Guide Is For

This guide is designed for:

Founders building SaaS products and looking to secure early customer agreements
Solo developers moving from side projects to monetized apps
Product teams ensuring terms align with backend capabilities and customer commitments

Whether you're drafting your first contract or refining an existing one, this guide gives you the clarity and tools to create agreements that work in the real world.

2. What Is a SaaS Agreement?

2.1 Definition and Purpose

A SaaS agreement is a contract between a software company and a customer. It explains how the customer can use the software, what the company will provide, and what rules both sides must follow. This type of agreement is common for software that runs online and is paid for every month or year.

The goal is to protect both the business and the customer. It makes sure the customer knows what they’re getting and helps the company avoid problems if things go wrong.

2.2 Key Differences from Traditional Software License Agreements

Here’s how a SaaS contract differs from a traditional software license:

Feature	Traditional Software License	SaaS Agreement
Delivery	Installed locally	Accessed via the cloud
Payment Model	One-time license fee	Recurring subscription
Ownership	User owns a copy	Provider retains ownership
Maintenance	Manual updates by user	Automatic updates by provider
Data Control	Stored locally	Hosted by the provider
Access Rights	Broad usage rights	Controlled, time-bound access

Because SaaS is delivered and maintained online, agreements must include terms specific to uptime guarantees, support levels, and data handling. These concerns don't typically arise in offline software models, making SaaS agreements more dynamic and detailed.

3. When Do You Need a SaaS Agreement?

3.1 B2B SaaS vs. Self-Serve SaaS

If your software is made for businesses, also known as B2B SaaS, then a formal SaaS agreement is almost always required. Business customers often expect written terms before using your service. These terms help set clear rules and avoid confusion.

For self-serve SaaS, where users sign up online without talking to sales, you may rely on online terms and conditions. However, if you collect sensitive data or charge for the service, a full SaaS agreement still adds protection.

3.2 Signs You Need a Formal Agreement

You should create a SaaS agreement when:

Customers ask for legal terms
You handle personal or company data
You offer paid plans or custom services
You sell to large companies or government groups
You provide service guarantees or support levels

These situations bring more legal risk. A clear agreement helps protect your company.

3.3 Reducing Risk for Your Business

A SaaS agreement reduces risk by explaining who is responsible for what. It limits your legal duties, sets payment rules, and explains what happens if things go wrong. If a customer has a complaint or wants to leave, the agreement shows what is fair.

For B2B services, the stakes are higher. Business clients may lose money if your service fails. A written SaaS contract shows that you take these risks seriously and that your company is prepared.

4. Key Components of a SaaS Agreement

key components of saas agreement

A strong SaaS agreement includes clear sections that explain the rights and duties of both sides. Below is a brief synopsis of each key component.

4.1 Definitions

This section explains key terms used in the agreement. Common terms include:

Service: The software and features you provide
Customer Data: Any data uploaded or created by the user
Downtime: When the service is not working or not available

These definitions help avoid confusion and keep everyone on the same page.

4.2 Grant of Rights

This part explains what the customer can and cannot do with the software. It usually includes:

The right to access and use the service
Limits on how many users can use it
A reminder that the customer does not own the software

This helps protect the provider’s rights and ensures fair use.

4.3 Customer Obligations

The agreement should list what the customer is expected to do. This may include:

Keeping login details private
Following usage rules
Not using the service in harmful ways

This section helps prevent misuse of the software.

4.4 Fees and Payment Terms

This explains how much the customer pays and when. It often includes:

Pricing structure (monthly, yearly, etc.)
Payment due dates
What happens if a payment is late

Clear payment terms help avoid billing problems.

4.5 Service Levels

This part sets out what level of service the provider will give. It may include:

Uptime targets (for example, 99.9% available)
Support response times
When updates or fixes will happen

These rules help manage customer expectations.

4.6 Intellectual Property

This section makes clear that the company owns the software. It should also explain:

Who owns data or content added by users
That users do not gain any rights to the code

This helps protect your business and its products.

4.7 Data Protection and Privacy

This explains how customer data is handled. It may cover:

Data security practices
Rules for following privacy laws like GDPR
What happens in case of a data breach

This part is important for trust and legal safety.

4.8 Confidentiality

This part promises that both sides will keep private information secret. It helps protect business plans, pricing, and other sensitive data.

4.9 Term and Termination

This section explains how long the agreement lasts and how it can end. It may include:

Start and end dates
Rules for renewing or cancelling
What happens to data after termination

This keeps both sides clear on their rights.

4.10 Limitation of Liability

This part limits how much the provider has to pay if something goes wrong. It protects against big losses and keeps risks reasonable.

4.11 Indemnification

This explains who is responsible if a third party makes a legal claim. Usually, each side agrees to protect the other if they cause legal trouble.

4.12 Dispute Resolution

This part covers how to handle disagreements. It often includes:

Which country’s laws apply
Whether disputes go to court or arbitration

Clear rules here help avoid long and costly legal fights.

You can generate a SaaS agreement in under 15 minutes with our easy-to-use contract builder. No login required

5. How to Draft a SaaS Agreement (Step-by-Step Guide)

draft saas agreement

5.1 Determine Key Terms

Start by writing down the key parts of your service:

What features you offer
How users will access them
What the billing model is (monthly or yearly)
Payment terms, such as due dates and late fees

Clear terms reduce confusion and make your business easier to manage.

5.2 Describe the Service

Explain what the customer will get. This can include:

Software functions
Limits on users or data
Support options

Avoid vague words. Be simple and direct.

5.3 Support and Maintenance Terms

Write out your rules for:

Fixing bugs
Updating features
Support response times

If your team takes weekends off, say so clearly.

5.4 Customization and Tailoring

If you offer custom services or special deals, include these in the agreement. Make sure they match what was promised during the sales process.

This part is often needed for large B2B clients who ask for changes.

5.5 Legal Review and Risk Management

Even a simple agreement should be reviewed by a legal expert. A lawyer can:

Check for missing parts
Make sure your terms follow local laws
Suggest better ways to reduce risk

This small step can save you big trouble later.

5.6 Testing and Feedback

Once you have a draft, test it:

Show it to team members
Ask a few trusted users to review it
Adjust anything that causes confusion

Make changes before you share it widely. A clear agreement shows that you care about being honest and fair.

6. Drafting Tips and Best Practices

6.1 Use Clear, Simple Language

Avoid long or complex sentences. Use plain words that your users can understand. Even when dealing with legal topics, it's better to explain things simply. For example, say “You must pay on time” instead of “Timely remittance of fees is required.”

Clear language builds trust and avoids misunderstanding.

6.2 Match Terms to Your Product

Make sure the agreement reflects how your product actually works. If your app allows unlimited users, the contract should not limit user numbers. If your support is only through email, do not promise phone calls.

Keeping your terms aligned with your features helps manage customer expectations.

6.3 Review Regularly

Your service may change over time. When you add new features, raise prices, or update your support plan, your agreement may also need changes. Set a regular time to review and update it, such as every six months or after big releases.

6.4 When to Consult a Lawyer

If your product handles personal data, involves high-value contracts, or serves global customers, a lawyer’s help is important. Lawyers can:

Help with GDPR and privacy rules
Spot hidden legal risks
Review your liability limits

Good legal help now can prevent expensive mistakes later.

7. Resources

7.1 Recommended Template Sources

If you’re not sure where to start, using a trusted template can save time. Here are a few places that offer reliable SaaS agreement templates:

SaaSGree: Generate SaaS contract from templates with contract builder.
Cooley GO: Offers free templates for startups, including SaaS terms.
LawDepot: Lets you build custom contracts online.

These can give you a starting point, but remember to adjust them to match your own product.

7.2 Tools for Contract Management and E-Signature

Once you have your agreement ready, you’ll need a way to send, sign, and store it. These tools help:

Tool	Main Use
DocuSign	Secure online signatures
HelloSign	Easy e-signing with team features
Contractbook	All-in-one contract management

Using these tools helps you work faster and keeps your agreements organized and safe.

8. Conclusion

A strong SaaS agreement is more than just a legal document. It is a clear promise between you and your customers. It shows what your service includes, how you handle data, and how both sides should act if something goes wrong.

For B2B companies, having a written agreement is not just helpful—it is expected. It helps close deals, builds trust, and reduces risk.

Keep your agreement simple, honest, and up to date. Review it as your product grows, and don’t be afraid to ask a lawyer for help when needed.

You can Generate a SaaS agreement in under 15 minutes with our easy-to-use contract builder.
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