Saas Agreement Legal Issues
1. Technical specifications. While SaaS-related technical specifications are important for every product or service offering, they are often left out, but defining appropriate technical specifications is essential to establish expectations between the parties and avoid disputes. This is especially true when SaaS is tailored to the customer`s business or processes. Therefore, the SaaS contract should contain technical specifications that appropriately (and specifically) describe the expected functionality of SaaS. In most cases, the technical specifications provide the parameters against which SaaS performance is measured, whether due to the acceptance testing process (if any) or predefined guarantees or service levels. The service levels and service credit mechanisms typically offered by SaaS providers, if at all, are often not sufficient and do not incentivize the right kind of performance from the SaaS provider. The SaaS agreement should include at least service levels for availability, capacity, response and solution times, capacity, support, and service capacity. For the customer, it is important to ensure that service levels are clearly defined and that there are clear consequences for the inexeligibility of these service levels. Customers should also be cautious about performance standards embedded in a hyperlink or URL, as they are often changed unilaterally by the SaaS provider and therefore do not give scope or performance security to the customer. 2. Warranties and Service Levels. The extent to which warranty and service level negotiations are negotiated almost always depends on how important SaaS is to a given customer`s business.
If SaaS unavailability is essentially a significant impediment to the efficient or efficient operation of a customer`s internal business or processes, the customer would likely (and reasonably) require more robust service level guarantees and guarantees than a customer who is not affected in the same way. However, in both cases, the SaaS agreement can and should address how the parties treat unavailability or other « bad » services. There are also legal issues that can be avoided or mitigated by using SaaS instead of a license agreement. A well-touted benefit of SaaS is the purported prevention of taxes that would otherwise apply to royalties, but this benefit requires further examination. While it is true that royalties are generally taxable, the idea that SaaS income will never be taxed is false and depends on the jurisdiction in which the services are offered. SaaS may be taxed differently in different jurisdictions where it is available, even if those jurisdictions are within the same country. For example, according to the information currently available, there are many jurisdictions in the United States that apply turnover taxes on SaaS (such as California, Illinois and New Jersey), as well as others that do not collect this tax (such as Texas, Washington State and New York). The same goes for offering SaaS across national borders. A U.S. saaS provider who is not accustomed to managing a national VAT (VAT) must consider VAT when expanding into Europe, where all EU member states are required to meet minimum VAT standards. .