SaaS Agreement – How to limit your liability

It is important to ensure that you have detailed liability and indemnity clauses in your Software as a Service (“SaaS”) agreement. Depending of the nature of your software business, there may also be certain commercial risks that you may want to include in this section of your SaaS agreement. As a business operating and selling in Australia, you have obligations under Australian Consumer Law, which you are required to meet. These should also be addressed in your agreement.

Limitation of liability and disclaimers

You should set out and ensure, in the running of the business, that you take the necessary steps so that the software is as advertised, but include in the agreement that you do not guarantee that the software will meet the user’s requirements. You should state that each user and computer is different and that the software will not work for all situations or operating systems.

To further protect your business, you can also include that you are not responsible for third party hosting or the reliability of those services, any negative consequences or outcome of software not being available, any disruptions or unintended uses of the software. The clause should include limitation of the total damages payable by you and outline other damages that you should not be liable for.

Australian Consumer Law

It is also recommended that you include a detailed Australian Consumer Law clause which addresses your responsibilities under Australian Consumer Law. You should be aware that there are certain consumer rights of the users that cannot be excluded.

To avoid disputes, it is prudent to list the guarantees that are provided to the user under Australian Consumer Law e.g. that you will provide the services with due care and skill, that the services and software are fit for the purpose that you advertised, that the user is using the service for the intended purpose and that the services were provided in a reasonable time.

Indemnities

The SaaS agreement should indicate that the user will be liable for and indemnify you against claims and actions which are the result of the user providing information that is not accurate or up to date, the user breaching the terms and any other misuse of the software by the user. You should also include a clause in which the user agrees that they will pay for their costs in relation to the process of dispute resolution if required and that the obligations under this clause will survive termination of the SaaS agreement.

Conclusion

Clearly identifying your responsibilities under the Australian Consumer Law, setting the limitations of your liability and taking steps to indemnify your business is very important. If you are setting up a SaaS service and require any legal advice or assistance in drafting the necessary legal documents, contact us on 1300 544 755 and speak with one of our experienced software and IT lawyers, we would be happy to assist!