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HIPAA Compliance Checklist for 2025
SaaS adoption continues to expand, becoming an integral aspect of organizations. As of 2023, a company with an average of 500 to 1000 employees uses around 300 - 400 SaaS applications, according to CloudEagle’s SaaS spend report.
With the growing need for SaaS solutions, the significance of a meticulously crafted SaaS agreement cannot be overstated. SaaS agreements are an essential aspect of the purchase process. When properly termed, discussed, and executed, they protect all involved parties. However, mishandling these agreements can lead to significant repercussions.
SaaS agreements are more than legal documents; they form the foundation of your business or vendor partnerships. So, it is critical to understand the key clauses that you must not miss in a SaaS agreement. Ignoring these can lead to significant financial hassles and legal implications.
To help you avoid the adverse impacts of unfavorable SaaS contracts, here is a list of the critical clauses you must pay attention to while signing a SaaS agreement.
1. What is a SaaS agreement, and Why it Matters?
A SaaS agreement is essential for establishing a simple and structured connection between the vendor and the SaaS buyer.
A SaaS agreement is a legal document that outlines the terms and conditions of a SaaS provider's relationship with its customers. It specifies the terms of service, software access rights, and the subscription model, ensuring all parties know their respective roles and duties.
Typically, the agreement addresses service level agreements, data security, and compliance requirements.
Why is a SaaS agreement important?
- Accountability and clarity: Provides a written record of expectations and commitments that can be used as a reference by both parties.
- Software Access Rights: It outlines the scope of software services and the corresponding customer subscription charge.
- Usage Guidelines and Protections: Protects the SaaS buyer by clearly defining software usage restrictions to prevent unauthorized usage or unlawful activities, thereby reducing potential legal risks from vendors.
- Risk Mitigation: Use liability limitation provisions to safeguard the enterprise from the negative effects of data breaches and piracy attempts.
- Licensing: It helps the buyer prevent legal disputes and financial concerns when licensing cloud-based software.
- Compliance: Ensures that both parties adhere to relevant laws and regulations.
2. SaaS Agreement vs. Perpetual License: What's the Difference?
Before reviewing SaaS agreement clauses, it helps to understand how a SaaS contract differs from a traditional perpetual license because the distinction shapes what each clause needs to protect.
Because the vendor controls the infrastructure in a SaaS model, the contract clauses around uptime, data, and termination carry far more operational risk than a traditional license.
3. Key Clauses in a SaaS Agreement
As stated above, the ideal SaaS agreements must have specific key clauses for a well-informed contract signing process. Let us have a look at the key clauses:
1. Agreement scope
The scope of the agreement clearly defines the boundaries and constraints of the services offered and the precise functionalities and features covered by the agreement.
A SaaS agreement's Scope of License typically includes:
- Authorized means of obtaining and using services
- Permissible SaaS services and the scope of access
- Number of permitted users or access restrictions.
- Specific business areas or markets may be subject to restrictions.
- How users can utilize the product with each change in scope and permissions granted.
Access clauses are essential in modern SaaS contracts because products are often not offered through a traditional licensing setup in which software copies are maintained on user devices.
The Clickup SaaS service agreement clause describes the terms related to the provision and use of the downloadable client software as part of the service.
It contains information on the license provided to the user for the usage of the software, underscoring that the license is not a sale of the software and that the business retains all rights, title, and interest in the software.
Furthermore, it imposes constraints on the user, outlining acts that are not permitted concerning the software, such as copying, reproducing, changing, or distributing it.
Sailpoint’s agreement scope clause is another excellent example. It specifies the parameters under which the consumer can access and use the SaaS services. It highlights the customer's non-exclusive, non-assignable, and internal business usage restrictions, stressing the rights granted under the agreement.
Sailpoint's agreement scope clause is a great example. It clearly outlines the terms for how customers can access and use their SaaS services. It highlights that customers have non-exclusive, non-assignable rights for internal business use under the agreement. This straightforward approach helps the provider and the customer work together effectively in their SaaS partnership.
2. Subscription and pricing plans
Subscription and Pricing Plans clause in a SaaS license agreement mainly covers the
- Vendor's subscription details
- Pricing structure, and
- Service delivery.
This section of the SaaS license agreement typically describes the charges, payment frequency, and payment method.
The subscription details are specified in the contract, including the exact services provided by the SaaS vendor and their manner of delivery. Payment terms, such as frequency and method of charge, are also specified explicitly.
Most SaaS contracts include monthly, quarterly, or annual payment periods. However, there are various SaaS pricing models, including flat-rate, usage-based, tiered, per-user, and per-active-user pricing.
Watch for: Auto-escalation clauses that allow price increases at renewal without explicit approval. Negotiate a price lock of at least 12 months on the contracted tier.
This Subscription clause of the Kissmetrics SaaS license agreement describes the services offered in each plan, the subscription period options, the automatic renewal procedure, and the way to access specific plan data.
This clause clarifies the subscription terms, payment cycle options, and process for renewal or cancellation, all of which are critical components of a SaaS agreement's Subscription and Pricing Plans clause.
Auto-renewal has been mentioned in the clause, so you can negotiate to cancel the auto-renewal clause to avoid hidden expenses.
This payment clause of Asana’s SaaS service agreement is also an ideal example of a subscription and pricing plan. It clarifies the payment terms, including the payment deadline, the consequences of late payments, and the potential interest or collection costs.
The clause specifies the framework for end-user subscriptions, including the framework for subscription costs and the conditions for adding or dropping end users.
3. Service Level agreements
A SaaS service level agreement (SLA) can be used as a stand-alone document or as part of an elaborate SaaS provider agreement. It specifies the extent of support and service a SaaS provider commits to offering the customer.
The software's uptime percentage is crucial and frequently expressed as a benchmark of 99.9% or, more commonly today, 99.99% uptime. (means only 0.1% downtime.)
Other critical aspects of the SLA include time to respond to time-constraint issues, penalties for failure to comply with guarantees, billing and pricing structure, security and compliance measures, and particular performance metrics and key performance indicators (KPIs).
The SLA is a thorough legal contract explaining the responsibilities of the SaaS seller and the buyer, ensuring that the software provided meets the buyer's needs.
Watch for: "Best efforts" language instead of a defined uptime commitment. That's not an SLA; it's a wish. Also, check that exclusions for "planned maintenance" are time-bounded; otherwise, the vendor can take the system down at will.
The SaaS service level agreement clause in Monday.com specifies the uptime guarantee and priority support capabilities available to Enterprise Plan or higher tier customers. The clause defines the SaaS Service Level Agreement (SLA) and states that any terms and conditions not mentioned in the SLA are as outlined in Monday.com's Terms of Service or any other agreement between the parties.
Cloudflare, in its SLA agreement, states it will have 100% uptime and also states that it will offer a financial remedy if, by chance, it fails to upload the uptime. Moreover, it states that if there is downtime, Cloudflare offers a formula for calculating a service credit.
4. Data ownership and security
Both vendors and users will generate large amounts of sensitive data when using software. A data ownership and security clause is critical for clarifying the ownership of data gathered by the software company, especially given the SaaS providers' role in storing client data.
It is critical to understand how data is stored, transported, and retrieved and any security constraints. The SaaS license agreement must include a privacy policy outlining data protection, third-party access, and the provider's data usage procedures.
This section should also provide information on data encryption, backup mechanisms, and how the supplier handles security breaches.
Watch for: Clauses that allow the vendor to use your data for "product improvement" or "analytics" without explicit consent. Also, confirm what happens to your data after cancellation. Some vendors delete immediately, others provide a 30-day export window.
The Axosoft data clause clearly states customer data ownership, limits vendor use of that data to system operations only, and defines the vendor's obligations around security, integrity, and access suspension in the event of a breach.
5. Liability
The Limitation of Liability (LOL) clause protects the vendor against potential compensating claims in the event of contract breaches. This provision, included in the final agreement, limits the buyer's ability to demand particular damages if the SaaS service fails, thereby shielding the vendor from legal ramifications.
The Limitation of Liability section is designed to address the specific risks related to each SaaS product. This clause is commonly found in conventional vendor agreements, often benefiting the vendor and limiting the maximum damages for which the vendor may be liable.
Essentially, the clause functions as a disclaimer, accompanied by a statement limiting the total damages for which the vendor may be liable under the contract.
Watch for: Caps set to one or three months of fees. If you're on a $200K/year contract, that's negligible compensation for a major outage. Push for 12 months of fees as the minimum, with carve-outs for data breaches and gross negligence.
In Redocly's agreement, the provided clause effectively describes the liability restrictions in a SaaS contract. It indicates how Redocly and its affiliates cannot be held liable for any potential damages or losses sustained by the customer or third parties.
The provision addresses a variety of eventualities, including system failures, data loss, disruptions, and security breaches. It also addresses the provider's liability for consequential, incidental, and punitive damages.
The Microsoft agreement is an example of a comprehensive limitation of liability clause in a SaaS contract. It establishes the maximum recoverable damages, excluding incidental losses and lost profits or income. These restrictions apply even if the remedy does not fully compensate, and Microsoft is not liable for uncontrollable situations.
The clause emphasizes Microsoft's commitment to mitigating the impact of such occurrences and carrying out unaffected duties, giving clarity and protection to all parties involved in the SaaS license agreement.
6. Indemnification
Indemnification determines who pays if a third party sues over something connected to the software, an IP infringement claim, a data breach affecting an end customer, or a compliance violation. This is separate from the limitation of liability clause, which governs direct damages between you and the vendor.
What it typically covers:
- Vendor indemnifying the customer for IP infringement (if their software violates a third party's patent or copyright)
- Customer indemnifying the vendor for unlawful use of the platform
- Who handles legal defense, and how costs are allocated
- Notice requirements: most contracts require you to notify the indemnifying party promptly or risk losing coverage
Watch for: One-sided indemnity clauses where the customer bears all risk, but the vendor has no obligation. Push for mutual indemnification. Also, check notice timelines; some contracts void the indemnity protection if you don't notify within a very narrow window.
7. Confidentiality
Even if a separate NDA exists, every SaaS agreement should include a confidentiality clause. It protects both parties' sensitive information: pricing terms, product roadmaps, customer data, and technical architecture throughout the contract period and beyond.
What it typically covers:
- Definition of what counts as "confidential information"
- Duration of the obligation (typically 2–3 years post-termination)
- Permitted disclosures: legal obligations, regulatory audits
- Consequences of breach
Watch for: Overly narrow definitions that exclude pricing terms or contract structure. Also, confirm that the confidentiality obligation survives termination; some clauses expire when the contract ends, leaving your sensitive information unprotected.
8. Intellectual Property (IP)
In a standard SaaS relationship, the vendor owns the software, and you own your data. The clause gets more complex when customizations, integrations, or jointly developed features are involved.
What it typically covers:
- Vendor retains ownership of software and underlying IP
- Customer retains ownership of their data and content
- Treatment of custom features or enhancements paid for by the customer
- Restrictions on reverse engineering or sublicensing
- Brand and logo usage terms
Watch for: Clauses where the vendor claims ownership of any enhancements or configurations built on their platform, even those you paid to develop. If you're investing in custom integrations or workflows, negotiate to retain ownership or secure a perpetual license to that work product.
9. Termination and auto-renewal
SaaS contracts typically last one to five years, with longer contracts resulting in an 8.5% termination rate.
As per Devsquad research, Multi-year contracts of around 2.5 years in length or more have an average churn rate of 8.5%.
This clause serves as the contract's lifeline, laying forth the terms of the agreement and the procedures for renewing, suspending, or terminating the account. Most SaaS companies now favor evergreen renewals, which automatically renew the agreement unless the subscriber cancels it before a certain date.
Watch for: Short cancellation windows (15–30 days) paired with annual billing. Missing that window locks you in for another year. Negotiate for a 60–90 day cancellation window and get confirmation in writing.
HubSpot's termination clause sets the auto-renewal period as the lesser of the subscription term or one year. It describes the procedure for sending a non-renewal notice and instructs users to disable auto-renewal via account settings.
Chattermill's clause covers agreement start, automatic renewal, mutual termination with prior notice, and explicit triggers for early termination, including trial expiration and material breach.
10. Customer support and maintenance
The SaaS agreement's customer support and maintenance provision specifies the accessible support channels, which include a dedicated help center, an email ticketing system, and phone support during business hours. It indicates the desired response time as well as the team in charge of handling client concerns.
The clause also includes support services and maintenance provisions, outlining any applicable service guarantees. This comprehensive provision assures that the SaaS vendor is committed to delivering timely and effective support for their services.
Watch for: Vague "reasonable efforts" commitments instead of defined response SLAs by severity tier. If a Severity 1 outage has no defined resolution timeframe in the contract, there's no enforcement mechanism.
Xero's clause commits to 24/7 online support and service availability, acknowledges planned maintenance, and notes that advance notification cannot always be guaranteed.
ProcurePro's clause commits to routine improvements, bug fixes, and technical assistance without additional cost. It defines the limitations of support scope and clarifies that hardware-related and out-of-scope requests are not covered.
11. Product Modifications
The Product Modification clause specifies the provider's right to modify or discontinue the software, including related plans and pricing, with or without advance notification. It also describes the procedures for notifying customers about changes in functionality, pricing, or terms of service.
This clause is important because it notifies customers of prospective product and pricing changes, ensuring transparency and managing expectations.
Watch for: Clauses that allow feature removal or pricing increases with less than 30 days' notice. If a core workflow depends on a specific feature, removal without adequate notice is a real business risk. Negotiate for 60–90 days' notice on material changes, with a right to exit without penalty if you don't accept them.
Databox's modification clause permits changes or discontinuation of the app at the vendor's discretion, requires notification for major changes, and states that prices and plans are subject to change without vendor liability.
Dropbox's modification clause permits changes for legal compliance or service improvement, requires advance notice, and allows users to terminate before changes take effect. Continued use of the services signifies acceptance of amended terms.
To enhance your procurement process, listen to what Terry Larock, Head of Procurement at Tipalti, shared on the recent SaaS Mastermind podcast. He offers valuable insights for SaaS buyers and negotiators to sharpen their skills and achieve success.
12. Governing Law and Jurisdiction
The governing law clause determines which country's or state's laws govern the SaaS agreement and where disputes must be resolved. Often treated as boilerplate, it becomes critical in any disagreement.
What it typically covers:
- Applicable law (e.g., California law, English law)
- Jurisdiction for disputes…. courts or arbitration
- Whether disputes go to binding arbitration or litigation
- Arbitration rules and forum if applicable
Watch for: Jurisdiction clauses that require disputes to be resolved in the vendor's home state or country, which can make legal action prohibitively expensive. If you're operating across regions, confirm that the governing law is compatible with your compliance obligations; a US-law clause may not satisfy GDPR requirements.
4. SaaS Agreement Clauses: Red Flags to Watch For
Even well-structured contracts can carry terms that quietly disadvantage the buyer. These are the most common red flags across SaaS agreement clauses and how to push back.
Auto-renewal with a short cancellation window. If the cancellation window is under 30 days and the renewal term is annual, it's easy to miss. Get the window extended to 60–90 days in writing.
"Best efforts" SLA. Any SLA without a defined uptime percentage, measurement methodology, and credit mechanism is unenforceable. Require a number: 99.9% at minimum.
Data deletion on termination with no export window. Some contracts delete your data immediately on cancellation. Negotiate a minimum 30-day export period before any deletion.
One-sided indemnification. If the customer indemnifies the vendor but not vice versa, the vendor has no accountability for IP infringement or data mishandling claims. Push for mutual indemnity.
Liability cap below 12 months of fees. One to three months of fees is rarely adequate. 12 months is the standard floor; negotiate carve-outs for data breaches and gross negligence above the cap.
Vendor-only termination for convenience. If the vendor can exit with 15 days' notice but you can't, your operations are at risk. Require symmetry or a minimum 60-day notice period with transition support.
5. CloudEagle.ai for Managing SaaS Agreement Clauses
A SaaS agreement is critical documentation that shouldn't be overlooked, which is why understanding the key SaaS agreement clauses is essential before signing any contract.
Accurately managing SaaS contracts requires a comprehensive platform, and this is where CloudEagle can help.
Most organizations managing 300+ SaaS applications have no real visibility into what their contracts say when renewals are due, what SLA commitments are in place, or which agreements carry unfavorable auto-renewal terms. By the time a renewal date surfaces, the negotiation window has already closed.
Renewal tracking and alerts. CloudEagle surfaces renewal dates well in advance, giving procurement and finance teams enough runway to review terms, negotiate, or cancel before auto-renewal kicks in.
Contract clause visibility. Custom fields let you tag and surface specific clause types: SLA commitments, liability caps, and data return terms across your entire vendor portfolio. No more hunting through PDFs before a renewal call.
Centralized storage with access controls. All contracts live in one secure location, accessible to legal, finance, and IT without version confusion or scattered email threads.
Spend and contract alignment. CloudEagle connects contract terms to real usage data. When a vendor claims you've exceeded your licensed seat count, you can verify it against actual utilization before agreeing to any upgrade.
Failure to pay attention to SaaS agreement clauses can result in financial challenges, service disruptions, unforeseen costs, and various other complications. The clauses highlighted in this article will help you make informed choices before signing any SaaS agreement.
By the Time You Find the Clause, It's Already Too Late.
6. Frequently Asked Questions
What are SaaS agreements?
A SaaS agreement is a legal contract between a software-as-a-service provider and its customers. It defines how the software can be accessed and used, what the provider commits to in terms of service quality, how data is handled, and what happens when the relationship ends. Unlike a traditional software purchase, a SaaS agreement governs ongoing access.
What are the typical SaaS contract terms?
Most SaaS contracts include SaaS agreement clauses covering scope of use, subscription pricing, SLAs, data ownership, liability limits, indemnification, confidentiality, intellectual property, termination, customer support, product modifications, and governing law. The specific terms vary by vendor and deal size, but these categories appear in virtually every cloud service agreement.
What are the main clauses of an agreement?
For SaaS agreements, the most operationally critical clauses are the SLA (uptime and response commitments), termination and auto-renewal (when and how you can exit), data ownership (what happens to your data), and limitation of liability (how much the vendor owes if they fail). These four SaaS agreement clauses carry the highest business risk if they're vague or heavily vendor-skewed.
What are the 4 types of contracts?
The four main types of contracts are bilateral (both parties exchange promises), unilateral (one party makes a promise in exchange for an act), express (explicitly stated terms), and implied (terms inferred from conduct or circumstances). Most SaaS agreements are bilateral, express contracts, and both parties commit to explicit obligations in writing.
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