Contractual Clauses Archives

SaaS Agreement – FAQs -What is a SLA and Essential Terms to include in a SLA

SLA is the abbreviation for a service level agreement.

Is a SLA a Software Licence

No. A service level agreement (SLA) sets out the SaaS services being provided in addition to the right to use the SaaS software.

What is a SLA

A SLA forms part of a SaaS agreement. The SLA can be contained in a separate schedule to the SaaS agreement, or included in the main terms and conditions of the SaaS agreement. SLAs set out:

How much Detail

It is advisable for a SaaS supplier to provide some degree of detail in the SLA to avoid spending unnecessary time negotiating the addition of further details requested by SaaS customers.

The degree of detail included in the SLA will depend upon:

  • How much a SaaS customer pays for the SaaS software and services;
  • Whether the SaaS software is business critical i.e. online banking;
  • What is standard in that particular business sector.

Terms to Include

SLAs should generally contain the following provisions, where appropriate:

  • Guaranteed availability of the services and software;
  • Timing of and prior notice of maintenance;
  • Description of the security provisions at the hosting centre and the technical infrastructure;
  • Problem response and resolution times;
  • Customer support description and support hours;
  • Provision of service availability reports;
  • Backup of customer data;
  • Security and disaster recovery provisions;
  • Right to terminate for breaches of the SLA.
  • Service credits for breaches of the SLA;

Advantages of having a SLA

If SaaS suppliers do not have their own SLA, customers will often try to impose their own SLA on the supplier which does not “fit” the SaaS services being provided. This can lead to protracted negotiations about the content of the SLA.

Summary

Due to the unique nature of SaaS and in particular the use of SLAs you should seek specialist legal advice on the content of a SLA whether you are a SaaS supplier or a SaaS customer to ensure that your rights are adequately protected.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – FAQs – What is SaaS and Essential Terms to include in a SaaS Agreement

SaaS is the abbreviation for “software as a service”. You may know this under another name, for example subscription agreement, software on demand, software subscription agreement, cloud computing or ASP services (application service provider). 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 SaaS 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 agreement, whether you are a SaaS supplier or a SaaS customer.

Software Licence

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

If the SaaS customer is a global entity, you should specify:

  • Which companies or entities may access the SaaS software;
  • In which territories the software may be used; and
  • The number of authorised users;
  • Identify the specific purposes for which the SaaS software may be accessed; and
  • Name any third parties who will be permitted access to the SaaS software i.e. outsourcing providers or clients of the SaaS customer.

Intellectual Property Rights – IPR

The SaaS supplier should retain ownership of all IPR in the SaaS software and services it provides. The SaaS customer should retain ownership of all IPR in its systems, content and data. You should specifically state that the source code remains owned by the SaaS supplier. The SaaS customer should grant the SaaS supplier the right to use its IPRs for the term of the SaaS agreement i.e. to display the SaaS customer’s 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 SaaS 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 SaaS agreement the SaaS 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 SaaS customer data to a new supplier – in return for payment for this service.

Data Protection

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

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 agreement.

Service Level Agreement (SLA)

This sets out the hosting, support and maintenance services being provided to the SaaS customer by the SaaS 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 SaaS software is being used.

Summary

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 SaaS supplier or a SaaS customer to ensure that your rights are adequately protected and that you are fully complying with all applicable laws.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Brexit – Amendments to Terms and Conditions

SaaS suppliers and SaaS customers are becoming increasingly concerned about the effect of “Brexit” upon the terms of their existing SaaS agreements, particularly where contracts are subject to English law or SaaS suppliers or customers are located within the UK. Below is a summary of the main issues that SaaS suppliers need to be aware of that may result in problems arising now or in the future with the terms of their existing SaaS agreements.

Territory

Where the EU or the EEA is used:

  • To define a territory in which rights are granted to the parties in a SaaS agreement, for example countries in which a SaaS reseller may resell SaaS services; or
  • As a general concept, for example in relation to the countries in which a data centre must be located;

The wording may need to be adapted to ensure that this includes or excludes the UK (as necessary).

The use of “EU” or “EEA” is of particular importance where rights are being granted for specific countries, some of which may be exclusive rights or where the applicable law depends upon the location of the SaaS customers being within or outside the EU/EEA.

Applicable Law

English law is often chosen as the applicable law in international SaaS agreements. Even after “Brexit” this position should not change as English law:

  • Will still be one of the most flexible laws with few mandatory restrictions on liability and other contractual obligations;
  • Historically forms the basis of local law in many countries worldwide; and
  • Is more similar to US laws and legal concepts than other European country’s laws.

Force Majeure

Force Majeure clauses set out special rules that apply if something beyond a party’s reasonable control effects that party’s ability to comply with its contractual obligations. Depending on how a SaaS supplier’s force majeure clause is worded “Brexit” could be considered to be a force majeure event. In most SaaS agreements, a force majeure event entitles the non-breaching party to terminate the SaaS agreement, without penalty and this could be used by a unhappy SaaS customer looking for a reason to terminate the SaaS agreement early.

Application of existing EU based law

Some EU laws apply to the UK directly, for example: interest on late payments and compensation for the termination of commercial agents. Following a Brexit, the application of such laws and UK compliance with such laws may change depending upon the exact circumstances of the Brexit and some laws will still apply extra-territorially to the UK despite a Brexit.

Compliance with new EU based law

Prior to the UK actually formally leaving the EU, the EU will continue to make laws that apply in the UK and the UK will be bound by any new laws at least until Brexit is complete. For example: the UK’s compliance with the General Data Protection Regulation (GDPR) will automatically apply from the 25th of May 2018 but the UK government may then remove the GDPR from English law or adapt its terms after “Brexit” under English law.

Identifying Potential Issues

While there is currently no immediate need for SaaS suppliers to amend existing SaaS agreement terms, as the government’s “Brexit” strategy has not been finalised or published, SaaS suppliers should be aware of the issues and should now be:

  • Reviewing existing SaaS agreements to identify potential problems; and
  • Addressing problems that are identified within any new SaaS agreements or renewals of existing SaaS agreements entered into with SaaS customers in the interim.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – Terms and Conditions – Data Processing Agreement

 

UK SaaS suppliers currently have limited obligations to SaaS customers when processing personal data as part of their SaaS services. However, from the 25th of May 2018 the General Data Protection Regulation (GDPR) will impose many new  data processing obligations on SaaS suppliers. In particular, the obligation for SaaS suppliers to enter into a written data processing agreement with SaaS customers and subcontractors.

GDPR applies to UK SaaS Suppliers despite Brexit

Regardless of when and how Brexit takes place, the GDPR will apply to SaaS suppliers located within the UK if:

  • They offer goods or services to SaaS customers located within the EU (i.e. in any of the remaining 27 Member States); or
  • They monitor the behaviour of EU data subjects;

Even though UK SaaS suppliers will no longer be located within the EU themselves after a Brexit.

GDPR will apply to non-EU SaaS Suppliers

From the 25th of May 2018 the GDPR will automatically apply to all SaaS suppliers located outside of the EU i.e. in the USA, if:

  • They offer goods or services to SaaS customers located within the EU; or
  • They monitor the behaviour of EU data subjects;

Even though the SaaS supplier is not located within the EU.

Written Data Processing Agreement

Currently a SaaS supplier must include the mandatory written obligations imposed by the DPA within the terms of the SaaS Agreement.

From May 2018 SaaS suppliers and SaaS customers will need to include detailed data processing obligations in a separate written data processing agreement.

SaaS Suppliers should be aware that they need to enter into written data processing agreements not just with all SaaS customers, but also with all entities or persons who process personal data on their behalf, such as:

  • All subcontractors i.e. data centres, penetration testing providers;
  • All subsidiaries i.e. providing customer support, software maintenance and support.

Fines for Breach

From May 2018 data subjects will be able to claim damages directly from SaaS suppliers who breach:

  • Any obligations under the GDPR; or
  • Any lawful instructions of a SaaS customer.

In addition data protection authorities will be able to fine SaaS suppliers up to 4% of annual global turnover or 20m Euros (whichever is higher) for breaches of the GDPR.

Preparing for Change

To ensure compliance with the new obligations placed on SaaS suppliers (data processors) under the GDPR, SaaS suppliers should start preparing for the changes to data protection law now, by taking the following steps:

  • Review existing data protection policies and procedures for compliance with the GDPR;
  • Adapt existing privacy, security and data breach policies to comply with the new rules before the 25th of May 2018;
  • Create a written data processing agreement which reflects the above polices and which is compliant with the GDPR;
  • Review existing SaaS agreements to check limitations on liabilities and indemnities for data protection breaches;
  • Identify any subcontractors and subsidiaries who process personal data;
  • Audit compliance of subcontractors and subsidiaries with new policies and procedures; and
  • Add written data processing agreements to all existing agreements with SaaS customers, subcontractors and subsidiaries before the 25th of May 2018.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience in dealing with SaaS, cloud computing and IT law issues. If you require assistance with any SaaS agreements, cloud computing concerns or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – Terms and Conditions – Limitation Clauses

SaaS suppliers should always include limitation clauses in their the SaaS terms and conditions to attempt to limit or exclude liability for certain types of losses and to cap their financial liability for breaches of contract. However, in order for limitation clauses to be valid, SaaS suppliers must ensure that the wording of the limitation clause is clear and unambiguous, otherwise the whole clause could be ruled void by a court and the SaaS supplier’s liability will then be unlimited.

Dundee City Council v Geddes

In Geddes, a recent Scottish case, a construction contract contained a limitation clause which attempted to limit the contractor’s liability to a local council for a failure to supply goods of satisfactory quality or reasonably fit for their purpose. The clause stated that a claim for breach must be made in writing within 24 hours of delivery unless there were “special circumstances” to justify delay.

Interpretation by the Court

The court decided that it could be argued in virtually every case that “special circumstances” would apply so the scope of the limitation was uncertain. Accordingly, the court held that the entire clause was invalid for uncertainty. This resulted in the contractor being liable to the council for its failure to supply goods of satisfactory quality or reasonably fit for the purpose.

Court Powers

SaaS suppliers should be aware that if a limitation clause in their SaaS terms and conditions is disputed, in assessing the validity of a limitation clause a court may:

  • simply delete the part of the clause excluding liability and leave the remainder standing;
  • declare the whole clause invalid; or
  • insert wording to amend the clause.

As a court can take any of these options, limitation clauses should be drafted to try to reduce the risk that none of the intended exclusions or restrictions will be valid in the event of a dispute.

Summary

SaaS suppliers should ensure that the language they use in limitation clauses:

  • is not ambiguous;
  • does not contain different types of exclusions in one single clause i.e. financial caps and restrictions on the types of losses that can be claimed should be separated.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Heads of Terms – Entire Agreement Clause

Heads of terms are often by SaaS suppliers where the final terms of the SaaS agreement have not yet been fully agreed with the SaaS customer. By using heads of terms the SaaS supplier can start to provide the SaaS services to the SaaS customer. However sometimes the parties are unaware of, or overlook, the legal implications and dangers of using heads of terms prior to finalising the terms of the SaaS agreement.

A recent court case in the UK highlights these problems.

Matchbet Ltd v Openbet Retail Ltd

A software developer claimed damages against a technology supplier for breaching the terms of a development agreement. The development agreement was based on heads of terms but the final signed development agreement contained an entire agreement clause.

Entire Agreement Clause

An entire agreement clause is a clause which states that the terms of the agreement (in this case the development agreement):

  • are the entire agreement and understanding between the parties; and
  • supersede all proposals and prior agreements, arrangements and understandings between the parties.

The purpose of an entire agreement clause is to ensure that all of the rights and obligations of the parties are in one single agreement i.e. the agreement which contains the entire agreement clause, in this case the development agreement.

Relevance of Heads of Terms

As the development agreement contained an entire agreement clause, the heads of terms were irrelevant in determining the intention of the parties, when the court had to interpret the terms of the SaaS agreement. The court had to ignore the heads of terms as they were merely part of the pre-contractual negotiations between the parties and were excluded from the terms of the final SaaS agreement by the entire agreement clause.

Important Note

In light of the above, it is important for SaaS suppliers to understand the interaction between any heads of terms they use prior to signing a final SaaS agreement and the inclusion of an entire agreement clause in the final SaaS agreement.

Where a SaaS supplier wants to ensure that all of the provisions from the heads of terms are included in the final SaaS agreement, the final terms of the SaaS agreement should specifically mirror the provisions of the heads of terms.

Additionally, where the commercial terms have substantially changed between the signing of the heads of terms and the signing of the final SaaS agreement, it is essential that the SaaS agreement includes an entire agreement clause to exclude the out of date heads of terms.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

Speaker at the Berlin CloudConf 2013.

To register for my newsletter click here

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SaaS Agreements – Terms and Conditions – Safe Harbor Adequacy

European data protection authorities have recently raised serious reservations about the effectiveness of the safe harbor scheme and its ability to adequately protect SaaS customer data to the same standard as European data protection laws. If you are a SaaS supplier and are considering/or are already using a company located in the US to provide part of your SaaS services i.e. for hosting, you should be aware of the existence and limitations of the safe harbor scheme.

What is Safe Harbor

Safe Harbor allows an EU based SaaS supplier to lawfully transfer SaaS customer data concerning EU individuals to a sub-contractor located in the USA (usually a data centre), provided that the US sub-contractor has signed up to the principles of the safe harbor scheme.

Safe Harbor Registration

Safe harbor is a voluntary scheme and no company located in the USA is obliged to register. Companies chose to sign up to the safe harbor scheme by notifying the U.S. Department of Commerce that:

  • they have committed to comply with the safe harbor principles in their privacy statement; and
  • they agree to self-certify annually (to the Department of Commerce) that they comply with the principles.

EU Concerns

In light of recent Prism revelations, national EU data protection authorities have voiced growing concerns about the adequacy of the safe harbor scheme. On the 27th of November 2013, the EU Commission published its own concerns about the scheme. The Commission made the following 13 recommendations which should apply to all safe harbor registered companies:

Transparency

Companies should:

  • publicly disclose their privacy policies;
  • always include a link to the Department of Commerce Safe Harbour website in their privacy policy;
  • publish the privacy conditions of any contracts concluded with sub-contractors, e.g. cloud computing services;
  • clearly flag on the Department of Commerce website all of their group companies which are not members of the scheme.

Redress

  • privacy policies should include a link to the alternative dispute resolution (ADR) provider named;
  • ADR should be readily available and affordable;
  • the Department of Commerce should monitor ADR providers more systematically.

Enforcement

  • following certification/recertification, a certain percentage of companies should be investigated for compliance with their privacy policies;
  • if found to be non-compliant, the company should be subject to a follow-up investigation after 1 year;
  • the competent EU data protection authority should be informed of doubts about a company’s compliance or any pending complaints;
  • false claims of safe harbor adherence should be investigated.

Access by US Authorities

  • privacy policies should include information on the extent to which US law allows public authorities to collect and process data transferred under the safe harbor scheme. In particular indicating when exceptions apply i.e. to meet national security, public interest or law enforcement requirements.
  • the national security exception should only be used to the extent that it is strictly necessary or proportionate.

Summary

In light of the above and rising SaaS customer awareness of the limitations of safe harbor, if you are a SaaS provider using a sub-contractor based in the US you should be including additional provisions in the terms of your SaaS agreement to cover the above concerns. You should ensure that you are granted the right to check your sub-contractors actual compliance with its safe harbor obligations, for example: by adding the right to audit compliance with the provisions of its privacy statement.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

Speaker at the Berlin CloudConf 2013.

To register for my newsletter click here

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SaaS Agreements – Terms and Conditions – Renegotiating Terms

Customers are increasingly attempting to renegotiate the terms of existing SaaS agreements, to reduce costs as more SaaS suppliers enter the market offering competing and cheaper SaaS services. In order to pre-empt such discussions SaaS suppliers should review their current SaaS agreements to ensure that they have the following terms in place to deal with and counter such requests.

Annual Price Alignment

SaaS customers will argue that hosting, storage and IT costs are becoming ever cheaper, so the savings should be reflected in prices. However, even if this is true, this does not automatically have a knock-on effect on a SaaS supplier’s total costs. Wages, IT and professional indemnity costs are increasing. It is therefore prudent to have the right to increase fees included in the pricing terms of your SaaS agreement. SaaS suppliers can then decide on an individual basis whether to actually exercise this right. Without this right, SaaS suppliers will have difficulties increasing prices at all.

Merger & Restructure

Depending upon the pricing model used, SaaS suppliers may or may not align prices to the numbers of users, traffic, data storage etc. However all SaaS suppliers set their prices based upon some sort of variable – which could change in the future. For example, if a SaaS customer merges their business with a competitor, is acquired, or simply restructures its business, a SaaS supplier must have the right to adjust prices to reflect the increase in users, traffic, data storage etc. This right should be specifically included in the terms of the SaaS agreement. It should include the right to adjust prices if the scope of access to the SaaS services is to be altered or increased, to a different set or extended group of users.

Term

SaaS customers often order SaaS services for a fixed term and obtain a discounted price. The SaaS agreement often says nothing about an increase in prices after the expiry of the fixed term. SaaS suppliers should always include a right to renegotiate or increase prices prior to expiration of the fixed term. If a discount has been given in return for a fixed term then any discount should cease to apply after the fixed period expires. If there is no fixed or minimum term SaaS suppliers should include a specific contractual right to renew prices on a regular basis.

Termination

Any termination rights given to a SaaS customer in a SaaS agreement could become problematic when negotiating changes to existing terms. Customers who have the right to terminate a SaaS agreement at any time, can simply demand a lower price and then terminate if there is a disagreement. Where SaaS customers are granted more restrictive rights of termination, it will be more difficult for them to terminate if you exercise a contractual right to increase prices.

Changes in Law

The laws applicable to your SaaS agreement will change with time. SaaS suppliers should reserve the right to amend their SaaS agreement terms to incorporate any changes in mandatory applicable laws, without this triggering a wholesale renegotiation of the SaaS terms generally. For example, once the new Data Protection Directive is finalised (probably next year), SaaS suppliers may have a mandatory obligation to disclose data and security breaches which may currently be prohibited under existing SaaS agreement terms.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To learn more about SaaS and cloud computing join me at the Berlin CloudConf 2013 on 5th of December.

To register for my newsletter click here

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SaaS Agreements – Dealing with Late Payment or Non-payment of Invoices

In the current economic climate, SaaS customers often delay payment of invoices. In order to protect your SaaS business and improve your cash flow, you should consider including the following in the terms of your SaaS agreement.

Right to Claim Interest

There is no requirement to have an interest clause in your SaaS agreement, as you have a statutory right to claim interest on late payments from a business customer (BTB) under the Late Payment of Commercial Debts (Interest) Act 1998 (“Act”). The statutory interest rate to be applied is the applicable Bank of England Base Rate + 8%.

Alternatively you can specify a specific interest rate in your SaaS agreement. This can be a number i.e. 7%, or a reference to an index i.e. the European Central Bank base rate, or a combination of both i.e. the Bank of England base rate + 2%. The interest rate specified can be higher or lower than the statutory rate. Note that if you specify an interest rate in your SaaS agreement, the  statutory rate will not apply, even if the interest rate you specify is lower than the statutory rate.

SaaS suppliers should therefore consider the following when deciding whether or not to include an interest clause and specific interest rate in the terms of their SaaS agreement.

  • By specifying an interest rate in your SaaS agreement you are inviting a business customer to negotiate a lower rate. If you have a weaker bargaining position, you may have to agree to a rate much lower than 8.5%;
  • Time and money could be wasted on protracted negotiations on which index to use and the % rate applicable;
  • Many SaaS customers are not aware that you have a mandatory right to claim interest on late payment and that the statutory rate will apply.

Right to Claim Compensation

In addition to claiming statutory interest from a SaaS customer, under the Act you are also entitled to a fixed amount of compensation. The amount is based upon the amount of the outstanding invoice:

  • £40 – for debts less than £1,000;
  • £70 – for debts between £1,000 to £9,999; and
  • £100 – for debts over £10,000.

Recovery of Costs

Since the 16th of March 2013 SaaS suppliers have the additional right to claim the difference between the  fixed compensation amount and their reasonable costs in recovering the debt e.g. appointing a debt recovery company or lawyer. However this right only applies to debts accrued after the 16th of March 2013.

Right to Terminate or Suspend SaaS Services

If a SaaS customer fails to pay you on time this will be in breach of contract – but not a fundamental breach (which permits you to terminate the SaaS agreement and claim damages). SaaS supplier’s should therefore state in their SaaS terms and conditions that “time is of the essence” for all payments. If the SaaS customer then fails to pay  on time you can terminate the SaaS agreement immediately without notice and claim compensation. However many SaaS customers will not agree to time being of essence.

Alternatively you could include the following specific rights in the SaaS agreement to achieve the same  result:

  • the right of the SaaS supplier to terminate the SaaS agreement for late or non-payment; and/or
  • the right of the SaaS supplier to suspend delivery of the SaaS Services until payment is received.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Terms and Conditions – The Bribery Act 2010

If your are a SaaS supplier or SaaS customer you should be aware of the provisions of the Bribery Act when negotiating the terms of a SaaS agreement. The Bribery Act 2010 (“Act”) has been in force since July 2011. It aims to distinguish between hospitality (which is permitted) and bribes which are illegal. A breach of the Act can result in an unlimited fine and a maximum prison sentence of 10 years.

Relevance to SaaS Customers

The Act applies directly to SaaS customers. SaaS customers will be liable under the Act for any breaches of the Act caused by their agents or subcontractors i.e. their SaaS suppliers.

In order to protect themselves against such breaches, SaaS customers are increasingly requiring SaaS providers to include anti-bribery provisions in the terms of their SaaS agreements. Such provisions are generally acceptable if they simply state that the SaaS supplier complies with the 6 principles of the Act and has adequate measures in place to ensure compliance.

Relevance to SaaS Suppliers

SaaS suppliers operating mainly in the UK with UK based customers will generally not be affected by the Act, provided that the levels of hospitality that they offer to SaaS customers are proportionate to the SaaS provider’s business, i.e. the reasonable cost of meals out, tickets and travel expenses to events. No definition of excessive hospitality is given in the Act or the guidance to it. It is therefore advisable to keep records of all hospitality entertainment and its purpose so that evidence can be provided at a later date if necessary.

Note that if you are a SaaS supplier operating outside of the UK or you have SaaS customers based in developing countries you should be particularly careful about complying with the Act, as “hospitality” which is usual or acceptable in a developing country such as paying third parties in order to win a contract, could be considered a bribe under the Act.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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