SaaS is the abbreviation for “software as a service”. You may know this under another name, for example, ASP services (application service provider), software on demand or software subscription. These names all refer to the same thing – software being made available via the Internet to users.

What is a SaaS Agreement

A SaaS agreement is simply the name used for the agreement between a SaaS supplier and a SaaS customer which sets out the terms under which SaaS software may be accessed. This will usually include a service level agreement (SLA).

Differences between a SaaS Agreement and a Standard Software Licence

A SaaS agreement differs from a standard software licence in that:

– The SaaS customer will not usually receive a physical or installed copy of the software;

– No ownership in the SaaS software will be transferred to the SaaS customer;

– The customer ‘s right to use SaaS software will end upon termination of the SaaS agreement.

Essential Terms to Include in a SaaS Agreement

The following legal issues should be included in any SaaS terms and conditions, whether you are a supplier or a customer.

Software Licence

Access to the software should be limited to the term of the SaaS agreement. Once the agreement expires or terminates the software licence should automatically terminate.

If the customer is a global entity, specify which companies or entities may access the software, in which territories and the number of users. Identify the specific purposes for which the software may be accessed. Name any third parties who will be permitted access to the software i.e. outsourcing providers or clients of the customer.

Intellectual Property Rights – IPR

The SaaS supplier should retain ownership of all IPR in the software and services it provides. The customer should retain ownership of all IPR in its systems and data. Specifically, state that the source code remains owned by the supplier. The customer should grant the supplier the right to use its IPRs for the term of the SaaS agreement i.e. display its logos and copyrighted information.

Applicable Law, Jurisdiction & Language

State which law applies to the SaaS agreement and any disputes arising from it. In international SaaS agreements make sure that you specify in which language the dispute will be dealt with, and if the agreement is in more than one language, which language prevails if there is a discrepancy between the two versions.

Return of Data

At the end of the agreement, the customer’s data should be returned. The format in which the data is to be returned and payment for this service should be agreed in advance. Additionally, the parties can agree that the SaaS supplier will provide assistance in transferring customer data to a new supplier – in return for payment for this service.

Data Protection

The supplier is the data processor and the customer is the data controller. Under data protection law different rules apply to the data controller and the data processor. The supplier is obliged to process data in accordance with the customer’s instructions and should protect itself against claims from third parties that such processing was illegal. Likewise, the customer will also need to protect itself against claims from third parties caused by the supplier not processing data in accordance with its instructions or the agreement.

Please note that from May 2018 each party’s data protections obligations must be set out in a written data processing agreement which should form a schedule to the SaaS terms and conditions.

Service Level Agreement (SLA)

This sets out the hosting, support and maintenance services being provided to the customer by the supplier. The SLA should specify where the data centre is located, who is operating it, what security, backup and disaster recovery procedures are in place. Support hours and support services for dealing with hosting problems and software problems should be identified and documented and the procedure for dealing with upgrades and maintenance to the software should be specified. The particular details will depend on the amount being paid for the hosting, support and maintenance and the purpose for which the software is being used.


Due to the unique nature of SaaS agreements, you will need to seek specialist legal advice on the content of a SaaS agreement whether you are a supplier or a customer to ensure that your rights are adequately protected.

Irene Bodle is an international IT lawyer who specialises in IT law, in particular, SaaS and cloud computing. Irene provides specialist, pragmatic and business-focused legal advice to companies who provide IT services to business customers. She has over 14 years experience (gained both in-house and in private practice) advising technology companies across all business sectors on the legal and commercial risks of operating a technology business. Whether you are a start-up who needs help creating a legally compliant business website or are an established technology company who needs assistance drafting and negotiating complex legal agreements, Irene can help you achieve your commercial objectives, efficiently and cost effectively. As a dual-qualified English and Irish lawyer, Irene advises primarily on English law, but also advises on Irish IT law. Being based in Berlin and fluent in German, Irene can also assist in negotiating or advising on technology agreements drafted in German.

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