Contracts
When it comes to B2C SaaS platforms, it’s often sufficient to include a Terms of Service, Privacy Policy, Acceptable Use Policy, and other guidelines on acceptable online behavior for customer transactions. However, in the B2B world, you’ve likely seen both Terms of Service and standalone SaaS Agreements for products and services. In today’s post, I discuss when a Customer SaaS Agreement is recommended and what terms they should include.
In very early stage B2B SaaS companies, it’s often sufficient to have customers sign an Order Form that links to an online Terms of Service and Privacy Policy, thereby incorporating those terms into the contract between the provider and customer. It’s a quick way to close a sale, requiring no negotiations other than pricing terms on the Order Form. And, it’s cheaper because no legal counsel is required if there are no changes to legal terms.
However, as a startup grows, it will usually start to get larger deals, such as those $50K and above (and sometimes starting around $100K). Around this price point, many customers start asking to negotiate terms. While certain terms around payment and pricing may be written into the Order Form and override online terms, over time, it becomes unwieldy to overwrite so many clauses. That’s when it’s useful to have a standalone SaaS Agreement in Word version to send to your customer to redline, creating a 2 contract system for customer agreements.
A short note on legal operations. It’s helpful for your executive team or head of sales to create a system or rule for when to have customers sign an Order Form incorporating standard Terms, or when the SaaS Agreement is used, which terms are negotiable, and when to accept customer paper. It’ll go a long way to managing contract volume as your sales pipeline grows, and to preserve or even shorten your sales cycle without sacrificing on business and legal risk. An experienced commercial attorney can assist you with drafting your Terms, SaaS Agreement, and if needed, will work with your sales leader to create a repeatable process for using both documents.
When it comes to customer paper, it’s never ideal to accept their terms. I’ll discuss in a later post when using customer paper is appropriate and how to handle those discussions.
With certain products, larger customer accounts may require more provisioning and implementation than smaller accounts that can accept out-of-the-box usage. Due to this difference, SaaS Agreements often contain provisions describing how accounts are implemented, provisioned, team members responsible for it, timing, and support.
Many of the typical provisions in Terms of Service are also found in SaaS Agreements, but are now open to negotiation, such as IP ownership, indemnification, limitation of liability, warranty, and others. Providers often are willing to provide more warranties, indemnities, insurance coverage limits, and a higher liability cap with larger contract values. Additionally, a Data Processing Addendum is appropriate to the extent personal data is provided to the company and should contain jurisdiction-specific clauses applicable to the customer base.
Customers often also request a Service Level Agreement, particularly for critical errors that bring down the platform, along with service level credits (if offered) and support.
