If you run a software-as-a-service (SaaS) business, it’s essential to get your SaaS agreements right. SaaS agreements can look different, depending on the type of SaaS you are offering. For example:
- if the business is the only one using the SaaS, you might have a simple agreement with the business entity itself only; or
- if you sign up the business and they pay the subscription, but its employees are each users, then you might need to consider both terms with the business and platform terms.
These documents govern who owns what data, what happens when the service goes down, how you get paid, and helps protect you from liability. In this article, we go over what your SaaS agreement should cover and the risks of using a template.
Licence or subscription SaaS?
Previously, SaaS was often licensed out on a one-off payment, where the customer gets to keep a copy of the software. Nowadays, SaaS are often based on a subscription model, which merely lets the customer get access to a copy of the software that you hold.
Both have different practical advantages and disadvantages for your business. From a legal standpoint, your SaaS agreements should make clear what kind of model you’re using. The framing of your model affects everything else in the SaaS, including tax, IP, termination and what data the customer keeps when their subscription or licence ends.
Important clauses for your SaaS agreement
1. Subscription, term and renewal
If you’re using a subscription model, your agreement should include how subscriptions start, renew, and end. It should also outline what kind of notice you or the customer must give if cancelling or renewing the subscription.
It’s important to note that Australia has new unfair trading practices laws that apply to subscription contracts. From 1 July 2027, subscription contracts will require clear upfront disclosure, renewal reminders and cancellation that is as easy as sign-up, including if you sell business-to-business. Read more about these new laws in our subscription laws article.
2. Use and ownership of customer data, during and after the contract
One of biggest concerns for B2B customers is about data.
Your SaaS agreement normally specifies who owns customer data, and to what degree you can use and process the data.
But you should also consider what happens to your customer’s data at the end of the agreement. Consider:
- Whether you will use customer data to improve the product or train AI models (if so, on what terms)? Will this affect whether customers will want to use your SaaS?
- What happens to data on termination of the contract? Is there a way customers can export their data?
- How long do customers have to export their data?
- How long do you need to store their data for?
3. Privacy and security
If your SaaS handles personal information, you should consider compliance with the Privacy Act. From 10 December 2026, the Privacy Act will also require you to disclose automated decision-making. Read more about these changes in our article here.
4. Service levels and downtime
You should also decide whether you’ll have a service levels agreement. This states what level of uptime your service will have, and remedies that you will give the customer if it dips below that level.
The remedy is usually service credit, and you should decide how much service credit you’ll give for a certain amount of downtime or failure that your SaaS might experience. Either can be right depending on your market, but the agreement must match your operational reality. Promising 99.9% uptime when you cannot meet that standard means that you will be paying huge amounts of service credit. In particular, you should consider what parts of your SaaS rely on or are contingent on third party elements, such as hosting or any AI providers.
5. Intellectual property protection
Your SaaS agreement should cover who holds ownership of the platform, and of customer feedback. You don’t want a customer suggesting changes/improvements to your platform, and then being unable to use them due to IP considerations.
If your SaaS produces AI outputs for the customer, it’s even more important to speak to an experienced lawyer about your SaaS agreement. This is because ownership over AI-generated IP is murky, and the law is constantly changing to keep up with AI. An experienced lawyer can give you clarity on who has ownership over AI-generated IP in your specific case and get you prepared and protected for legislative changes.
6. Liability and indemnities
The degree you can limit liability and indemnify yourself depends on your specific situation, which is why consulting a lawyer about your SaaS agreement is essential.
At a baseline, it’s important to know that consumer guarantees can apply to B2B services and cannot be excluded. If your SaaS is normally used for personal or household purposes, or if your customers are businesses and the service costs less than $100,000 and is not part of their business operations, the consumer guarantees likely apply. Read more about consumer guarantees and how they might affect you in our article here.
Your SaaS agreement will also be a standard form contract, so laws relating to unfair contracts will apply. One-sided variation clauses and sweeping indemnities are examples of clauses that can get your business in trouble. Penalties for breaching these laws can now reach up to the greater of $100 million, three times the benefit gained from the breach, or 30% of adjusted turnover.
7. Suspension and termination
Your SaaS agreement should state:
- Under what circumstances can you suspend the subscription or licence, including non-payment, security threats, or abuse of the service
- What kind of notice will validly end the agreement
- What survives termination, including confidentiality, accrued fees, and data export
Why template SaaS agreements won’t work
Contract templates on the internet are especially dangerous for SaaS agreements. They will describe features you do not have, promise service levels you cannot meet, and allocate liability in way that doesn’t fit your risk profile. What’s more, since they are usually American templates, they will ignore the Australian Consumer Law entirely. They are also often out of date with newer laws, and the 2026-2027 subscription reforms will outdate them even more.
What next?
Our IT, SaaS and software team drafts SaaS agreements at fixed fees, built around your product, your customers and your risk profile. For help with your SaaS agreement, book a free consultation.
