Things to Look Out for When Creating SaaS Contracts

What is Software as a Service?

Over the last few years, Software as a Service (SaaS) has established itself as a term for the temporary use of software provided by a provider via an Internet connection. The software can usually be accessed via the provider's servers using a web browser. A local installation does not take place during this process.

As part of a SaaS contract, the licensee usually does not acquire a permanent license for the software, as was usual a few years ago when purchasing the Creative Suite or Microsoft Word, for example. SaaS solutions today work for a limited period of time, which usually ranges between a monthly and a multi-year license.

Since the software is provided via the provider's server, the licensee also usually does not have to pay an additional fee for maintaining the software. Installation and liability for hardware damage are therefore also waived for the licensee.

In return for providing the software, the provider charges the user a monthly or an annual fee. Volume-based payments have also been widely used in recent years.

SaaS Contracts: The Benefits for the User

• Lower costs for your own hardware and personnel.
• No big upfront costs
• Central availability Employees can access the software from anywhere via a web browser.
• No maintenance work on hardware, as this is taken over by the provider.
• Service and support are provided by the provider
• Further development of the software by the provider based on feedback from several thousands of customers.
• User only pays for the actual scope of use
• Data is processed on the provider's servers, not local copies with an increased data protection risk

SaaS: The Pros and Cons for the Provider

• Good scalability: Providers can reach many software users at once with little additional effort.
• Development and maintenance costs can be allocated to a wide range of customers
• Simple maintenance work on your own server instead of tedious updates on distributed customer servers

Which Points Should Be Regulated in a SaaS Contract?

However, in order to clarify the question of the most important points of drafting a SaaS contract, you should look at the legal nature of SaaS contracts.

Which Area of Law Can SaaS Contracts Be Assigned to?

SaaS contracts have been published in recent years and have therefore not yet been dealt with explicitly by law. Legally, a SaaS contract can therefore only be classified as a mixed contract with regard to service, work and rental contracts. The applicable area of law results from the respective service section.

For example, SaaS contracts can include contract work, as is the case with a data migration. In this case, the service cannot be charged by the hour after the work has been completed, but the service must actually be provided, proven and handed over.

Training that may be necessary, on the other hand, can be classified as a service contract, as no plant is handed over here and only efforts are paramount.

However, tenancy law is the core of a SaaS contract, as the provision of software is most comparable with the transfer of ownership under tenancy law. And although software is not a matter within the meaning of tenancy law, the current conventional opinion is that SaaS contracts represent temporary use, which is well in line with the regulations and the purpose pursued by tenancy law.

Contract Structure of a SaaS Contract

SaaS contracts are often provided as pre-formulated contracts. They therefore fall under the scope of the general terms and conditions (§§ 305 ff), unless the contracting parties explicitly negotiate the SaaS contract. As a result, an invalid clause or inaccurate wording is replaced by legal regulations.

Even though the contract was negotiated between the contracting parties, legal regulations apply to many points unless the contracting parties have reached an explicit agreement. In many cases, it is therefore good advice to find detailed wording in order to avoid adverse legal regulations.

This is particularly recommended in the event of a service failure, as the provision of the software is regularly subject to tenancy law, which in turn provides for uninterrupted provision of the leased property. However, this is not manageable for the provision of software, as even the best software may unexpectedly be unavailable for a few hours.

1. Contracting parties
2. Subject matter of the contract (type and scope of service)
3. Additional services provided by the provider
4. Remuneration, terms of payment
5. rights of use
6. Customer's duties to cooperate
7. Data storage, data backup, data security
8. Warranty/liability
9. Duration, termination, surrender/deletion of data
10. Processing of personal data
11. Quality of performance, maintenance times, fault management
12. Rights to involve third parties
13. Final provisions