Contracts that cover your SaaS

When should you think about SaaS contracts?

“Do you need contracts to cover your SaaS?” 🤔

Okay, fine, so that’s not exactly how people ask that question. 😉But phrasing aside, it’s something plenty of founders wonder: when do I need software contracts and which ones should I be thinking about? 👇

EULA vs. SLA vs. ToS vs. Privacy Policy 😑

Right? My head is spinning too. Here’s an overview: 

  • End-User Licensing Agreement (EULA). 📱A EULA is between a software buyer and a software creator. You’ll usually see one for software apps you download, install, and use a copy of on your computer/phone. Check out Apple’s standard EULA for anything you’ve downloaded in the App Store. 

  • Service Level Agreement (SLA). 📈Where EULAs are more common for apps, SLAs are more common for SaaS products and websites. An SLA details expected performance and how a business will handle major issues. If you heavily depend on third parties (e.g. Zapier) to run your app, you probably want to steer clear of this at first; you won’t be able to guarantee performance for the third party. 

  • Terms of Service (ToS). 👍Also called Terms of Use, this one outlines how a user can and cannot interact with your service. It may also set broad performance expectations and acceptable user behavior. Think of this one as the rules for doing business with a company. (When you register for an app or use a SaaS product, you are “doing business” with the provider. Check out Slack’s ToS.) 

  • Privacy Policy. 👤Outlines what personal information you collect, how you collect it, and what you do with it. 

You may also run across something called a SaaS Agreement. It normally bundles clauses you’d see in Terms of Service and Privacy Policy into one agreement.

When should you think about SaaS contracts? ⏰

Technically, you don’t have to have any of them. Well, except the privacy policy. There are some legal rules around that one, depending on your business and what state you’re in. 😬

But required or not, what they all do (when crafted and used correctly) is protect your business from misuse and lawsuits. So most companies adopt them. If you’re launching a SaaS product or web app, the safest route is to have a ToS and Privacy Policy customers can opt in to by the time you go live and accept customers. 💪

3 options for pulling contracts together ✍  

1. Copy/paste/edit contracts from similar companies 👀

A lot of startups snag agreements from other companies. It’s a popular option because it’s easy. But it’s also risky.

Pros:  Free, fast, and easy 

Cons: 

  • May not have been vetted by a lawyer 

  • Certain clauses will be specific to the other company  

  • You may need additional clauses to cover liabilities that are unique to your product; for example, you’ll want to be GDPR compliant if you’re serving European customers

  • While you probably won’t face legal action over it, it’s not cool to straight-up copy another company’s terms; in fact, it could be copyright infringement 

Tips: If you want to go this route, start with companies who make their privacy policies and terms of service available under the Creative Commons license. For example, Automattic. You can find their ToS and PP on Github. 🚀

2. Snag a template, or use an online generator  📋

Some companies offer templates or give you access to a generator that’ll spit out a contract based on some questions. 

Pros: Free or cheaper than legal counsel, fast, and easy  

Cons: 

  • Similar to option 1 

  • Super vague templates may not provide much legal coverage 

Tips: If you go this route, check out Axdraft for free Terms of Service, Privacy Policy, and even a Founders Agreement. Clerky is another option (though not free) for a wider variety of legal documents; it’s a bit more mature and used by Y Combinator. Atrium also provides ToS and Privacy Policies for a fee. All three cater to startups. 

3. Work with an attorney or legal firm 💫

Pros: Peace of mind, maximum protection from lawsuits, contracts specific to your business  

Cons: This can get expensive, depending on what firm or attorney you hire.  

Tips: There are plenty of sites, in the vein of Upcounsel, that’ll pair you with potential lawyer matches. But start with your friends and mentors. Who have they worked with? Do they specialize in startups and SaaS? Do they recommend them? 

Which option is “best” depends on your budget, how complex your product is, and how comfortable you are with risks. (Sorry not sorry if you expected more of a silver bullet answer there. 😁)

Obligatory disclaimer 👋

We’re not attorneys and this is not legal advice. If you have sticky questions about this stuff, ask around for an attorney who specializes in startup contracts—we know a guy if you need one. It’s nice to have legal help in your network anyhow.