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Everything You Need to Know About a SaaS License

If you are a business, setting up a SaaS license agreement can feel overwhelming. It can be difficult to wrap your head around all the disclosures and how complex components should come together to protect your business.

Don’t worry, that’s what we’re here for! In the post below, we’ll take you through all the basics.

We’ll go through the different components of a SaaS contract, and show you how to manage your own SaaS license agreements.

SaaS License example

What is a SaaS license?

A SaaS license is an agreement between a user and a software provider that allows the user to access and use the provider’s software on a subscription basis under certain terms and conditions. This type of license is commonly used in the SaaS industry, as it allows users to use software in exchange for a monthly fee, without having to purchase and maintain their own hardware and software infrastructure.

The key features of a SaaS license agreement include:

  • access to software,
  • user permissions,
  • payment structure,
  • restrictions on use and modification,
  • warranties,
  • support and maintenance,
  • termination of the agreement, and more.

Under this scenario, businesses using this model need to use specific contracts to support their subscription model and determine the terms on which users can use the software according to the terms of their subscription.

The purpose of a SaaS contract

As mentioned above, the purpose of a SaaS contract is to govern the terms of use and limitations of liability for a Software as a Service (SaaS) offering. In simple terms, a SaaS contract outlines the agreement between the provider of the SaaS application and the end user.

By setting out these terms in a formal document or agreement, the supplier can protect its intellectual property rights, and the end user can be assured of the quality and reliability of the service they are receiving.

💡 Remember, a well-drafted SaaS contract is essential for both parties, as it clarifies the mutual expectations and responsibilities, and helps to reduce the risk of disputes or ambiguities down the line.

📌 What does a SaaS license agreement include?

An SaaS License agreement between the provider and the end user will have specific needs and therefore different clauses that may vary according to the industry, product, or service.

However, all service agreements typically include a number of key components, including but not limited to:

  • Scope of the license: This section specifies the authorized use of the software, including the number of users, devices, and locations allowed
  • Pricing and payment terms: The agreement will outline the subscription fee or pricing structure and other charges. It may also cover payment methods, renewal options, and cancellation policies.
  • Data security and confidentiality provisions: This section describes how the provider will protect your data, as well as any restrictions on sharing or using your data.
  • Restrictions on use, transfer, or modification: The agreement may outline any limitations on how you can use the software, as well as any restrictions on transferring or modifying the software.
  • Warranties, support, and maintenance: The agreement may specify any warranties, service level agreements, or other guarantees related to the software.
  • Termination of the agreement: This section describes how the agreement can be terminated, including reasons for termination and any required notice periods.

📌 Consequences of not having a proper SaaS licence

Failing to have a proper SaaS license agreement can have serious consequences for both providers and users.

👉 For providers, it can result in legal liabilities and financial costs, for example, if users violate the terms of use or misuse the software. Additionally, lacking a clear agreement can lead to misunderstandings, disputes, and even legal action, which can be costly and demanding.

Without a proper license agreement in place, there is also a risk of data and security breaches that could compromise sensitive and personal information.

💡 Remember, it’s crucial for providers to always ensure that they have a comprehensive and legally binding SaaS license agreement in place to protect their interests and avoid legal disputes.

📌 How to create a SaaS licence agreement

Creating a SaaS license agreement may seem like a daunting task, but it doesn’t have to be, and besides that, it requires a lot of care.

The first step is to identify the key points you want to include in the agreement, such as:

  • Scope of the license
  • Pricing and payment terms
  • Data security and confidentiality provisions
  • Restrictions on use and modification
  • Warranties
  • Support and maintenance
  • Termination of the agreement
  • Dispute resolution
  • Governing law

This may involve consulting with legal experts or using a generator to ensure that your agreement is comprehensive and legally binding.

This last option is often very popular, as you can customize the creation of your agreement based on your specific needs and requirements without the high fees of using a lawyer.

👉 To use a generator, you will typically need to answer a series of questions about your company and the software you provide, and select and add clauses that you can customize according to your individual scenario, to generate a tailored agreement that covers all the necessary terms and conditions, including clauses related to the license of the software, disclaimers of warranties, limitations of liability, and indemnity, among many other aspects.

Once the agreement is customized and generated, you will get a document that covers your specific needs and complies with all relevant laws and regulations easily and usually with the option to have it available in multiple languages if required.

How iubenda can help

Our Terms and Conditions Generator is equipped with clauses that are specifically crafted to help software providers disclose in a legally binding way how their software can be used. The scenarios covered include, among others:

  • ✅ Clauses related to the license of the software,
  • ✅ Disclaimers of warranties,
  • ✅ Limitations of liability and indemnity

It comes with:

  • guided set-up;
  • hundreds of possible personalizations;
  • legislation monitoring;
  • pre-defined scenarios: buildable text modules also for marketplace, affiliate programs, copyright, eCommerce, mobile, and more.

🚀 The solution is optimized for complex scenarios like SaaS and drafted by an international legal team, available in 10 languages, and up-to-date with the main international legislations.

🚀 Getting started is easy: simply create a free account, activate the Terms and Conditions within the dashboard, and start generating.

Add your software-specific clauses now!

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The solution to draft, update and maintain your Terms and Conditions. Optimised for eCommerce, marketplace, SaaS, apps & more.