Tech & SaaS contracts: what to include in service agreements (part 1)

The SaaS market is experiencing rapid growth: over the past five years alone, the number of cloud solution providers worldwide has more than doubled. According to Statista, the global SaaS market reached over $197 billion in 2023 and continues to grow by more than 10% annually. However, as products scale, the number of legal disputes caused by vague or outdated contracts is also increasing. Well-structured service agreements are a key tool for protecting the interests of both service providers and clients. Poorly drafted SLAs, unclear provisions on data rights, and the absence of an exit strategy can lead to conflicts, penalties, and loss of trust. In this article, we provide a detailed overview of how to structure a legally sound service agreement for Tech & SaaS companies and offer practical guidance to help reduce risks and safeguard business interests.

Parties and Scope of Services

A properly drafted contract begins with a clear definition of the parties and the scope of services. This forms the basis for legal certainty and serves as a key tool for preventing disputes.

Defining the parties and affiliates

It is important to accurately identify:

• The legal names of both parties (including registration number and jurisdiction);
• Any affiliates that will also be granted access to the services;
• The individual authorized to execute and manage the agreement.

Including affiliates helps avoid the need for separate agreements with each subsidiary of the client, but requires precise language to outline their rights and limitations.

Description of services provided

The scope and content of the services should be detailed in a separate annex or a dedicated section of the contract. Typical elements include:

• Hosting, technical maintenance, and updates;
• Custom development, API creation, or integrations;
• Support services: helpdesk, training, administration.

It is important to distinguish between standard services and custom developments, as the latter may require a separate agreement with different timelines and pricing.

Service Levels and Performance Standards (SLAs)

Service Level Agreement (SLA) is a core component of any SaaS or tech services contract. It defines the performance standards the provider must meet and the consequences for falling short of those standards.

Uptime guarantees

One of the most sensitive metrics for users is service availability. Typically, a 99.9% uptime standard is applied, which allows for no more than 43 minutes of downtime per month.

The provider must specify the guaranteed uptime percentage, exclude scheduled maintenance from the calculation, and clearly define the time zone and measurement method. If the agreed uptime is not met, the customer is usually entitled to compensation in the form of service credits for future billing periods.

Response and resolution times

It is important to distinguish between:

1. Response time — the time it takes for technical support to acknowledge and start addressing an incident;
2. Resolution time — the time required to fully resolve the issue.

The contract should include an incident severity classification system and appropriate timeframes (e.g., 1 hour for critical issues, 8 hours for minor ones).

In addition to compensation terms, the SLA should clearly define:

1. A list of exceptions (e.g., DDoS attacks, force majeure events, failures caused by the client’s infrastructure);
2. A liability cap for the provider — often limited to the monthly service fee or the total contract value.

Data Protection and Security

With the rapid growth of SaaS services, companies increasingly become custodians of their clients’ sensitive data. This entails significant legal and technical responsibilities. The service agreement must thoroughly regulate data ownership, processing, storage, and response actions in case of a breach.

Data ownership and access rights

It is essential to specify that:

• The data entered by the user belongs to the client, not the provider;
• The provider may use the data strictly within the scope of delivering the agreed services;
• The client retains the right to request a machine-readable copy of their data at any time.

This is particularly critical upon termination of the contract — the client must be guaranteed access to their data and the ability to export it.

Compliance with privacy laws

The contract must include:

• Compliance with GDPR (EU), CCPA, and other applicable privacy regulations;
• Obligations to process personal data on behalf of the client under a Data Processing Agreement (DPA);
• Provisions allowing client audits and setting data protection requirements for subcontractors (e.g., Amazon AWS, Google Cloud).

For instance, under Article 33 of the GDPR, the provider is required to notify the client of a personal data breach within 72 hours.

Data storage and cross-border transfers

If the data is stored outside the client’s jurisdiction, the agreement must specify:

• A list of countries where the servers are located;
• The legal basis for cross-border transfers (e.g., Standard Contractual Clauses, SCCs);
• Assurances that data will be protected at a level equivalent to local law.

The contract should also outline breach response timelines, designated contact persons on both sides, procedures for notifying clients and regulators, and remedial measures. A clear incident response plan significantly reduces legal risks and reputational damage.

Payment Terms and Pricing

Financial terms are one of the most critical sections of a SaaS agreement. Poorly worded clauses can lead to disputes, unexpected charges, or even suspension of service access. It is particularly important to clearly define the pricing model, billing schedule, and rules for pricing changes.

Subscription model and additional charges

Most SaaS agreements are based on a subscription model — billed monthly, quarterly, or annually. However, it's essential to specify not just the billing frequency but also the renewal terms. For instance, if automatic renewal applies, the agreement must include the cancellation procedure and the deadline for opting out.

The contract should also outline which costs are not included in the base price — such as fees for integration, support outside of SLA coverage, or overage charges (e.g., exceeding the number of users or storage limits). Without clear provisions, the SaaS provider may legally apply additional charges.

Many jurisdictions (such as the EU and the U.S.) require automatic renewal clauses to be explicitly stated, and users must be allowed to cancel without penalties.

Currency, taxes, and invoicing procedures

The agreement should clearly specify the payment currency, which taxes are included or excluded (e.g., VAT or local duties), and how payment is made — in advance, upon delivery, or with a grace period. In cross-border agreements, the parties may also need to account for exchange rate fluctuations and foreign payment regulations.

Additionally, the invoicing process should be described in detail: whether invoices are delivered electronically or on paper, the payment terms, and the consequences of late payment — including interest charges, temporary suspension of service, or automatic termination of access.

How can Key2Law help with the preparation of Tech & SaaS contracts?

Tech & SaaS contracts require a high level of precision: from protecting intellectual property to ensuring regulatory compliance across multiple jurisdictions. The Key2Law team provides comprehensive regulatory and compliance support to developers, service providers, and corporate clients.

We help:

1. Draft and review SaaS/Tech Service Agreements. We cover all essential provisions: SLAs, confidentiality, data protection, liability, data transfer, and more.
2. Protect software and intellectual property rights. We ensure proper legal ownership, prepare licensing agreements, and defend against unauthorized use.
3. Ensure compliance with GDPR, CCPA, HIPAA, and other regulations. We audit your data processing practices and documents, prepare DPAs, and structure cross-border data transfers lawfully.
4. Prepare an exit strategy and termination terms. We minimize risks when exiting a project, ensure secure data return, and resolve outstanding obligations.
5. Represent your interests in disputes. We handle negotiations, pre-litigation procedures, and represent clients in arbitration and court proceedings.

If you're looking to enter into a reliable and transparent contract, contact Key2Law. We provide full protection for your SaaS project at every stage.