SaaS suppliers often prepare sales proposals in order to win business from prospective clients. A few basic legal clauses should be included in the sales proposal to protect your business if you win the sale, but more importantly, if you don’t.
There can be a substantial time delay between sending a client a proposal and actually negotiating the terms of the SaaS agreement. The proposal may also include pricing for optional additional functionality, that the client may want to order a later stage. The proposal should state dates for the validity of the various prices quoted, otherwise you could be obliged to provide functionality in 2012 for 2010 prices.
SaaS Agreement Terms and Conditions
The proposal should state that the software and services will be sold subject to the supplier’s standard terms and conditions. This is particularly important for SaaS applications. Often client’s – who are usually not software suppliers and who supply physical goods – will want to use their own standard terms and conditions. These will not work for a SaaS agreement as the software is not a physical good (and for many other reasons which will not be elaborated here). If the client’s terms and conditions are used – a situation which should be strongly resisted – they will need to be substantially amended, which will waste time and expense. If you already have suitable terms and conditions in place then it makes commercial sense for both parties to use these as the basis of the SaaS agreement.
More importantly – always specifically state in the proposal that your SLA (service level agreement) will apply. This sets out the hosting, maintenance and support services that you will be providing to the client. As you will usually be using a third party hosting centre to provide the majority of these services, the SLA must reflect the level of services that you yourself receive from the hosting centre. It makes no commercial sense to use an SLA provided by the customer, as you will not be able to comply with this.
It is imperative that you obtain the client’s undertaking to treat all information provided to them by you during the sales process – including any documents referred to in the proposal – as confidential. You will probably have given the client copies of your price lists, functional descriptions of your software and other internal documents which you do not want third parties to see. This is particularly important if the proposal does not lead to a sale and the client is speaking to your competitors… The client should agree to keep all information confidential and to return all of your confidential information immediately, if no sale is agreed.
No Obligation to Supply
The proposal should state that it is not legally binding and does not create any obligation on your part to provide the software or services to the client. Often between the proposal stage and the actual terms of the SaaS agreement being negotiated, your client’s requirements will have changed. You do not want to be bound by the terms and prices, in the proposal if the client has changed the basic scope of the services or the functionality.
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:
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