In Short
- SaaS companies need strong customer terms, vendor agreements, and employee contracts to protect IP, define responsibilities, and prevent disputes.
- Compliance with privacy law, Australian Consumer Law, and any industry-specific regulations is essential from day one.
- Regular legal reviews ensure your documents stay accurate as your product, pricing, and markets evolve.
Tips for Businesses
Audit your core documents early, including terms of service, privacy policies, and IP assignment clauses. Ensure your contracts clearly explain user obligations, data handling practices, and service limitations. Review agreements with employees and vendors, and speak to a lawyer about privacy, ACL obligations, and any industry-specific regulatory requirements.
If you are developing a Software as a Service (SaaS) company, you may be primarily focused on product development and customer acquisition while overlooking the essential legal documents or frameworks that protect your business. Many startup founders and growing SaaS businesses operate without proper legal arrangements in place, assuming they can address compliance issues later as they scale. This approach can create risks, including customer disputes, regulatory penalties, and improper assignment of intellectual property.
This article provides a comprehensive checklist to help you identify, review, and strengthen the essential legal documents your SaaS business needs to operate in compliance and protect your commercial interests.
Core Legal Documents Checklist
Customer-Facing Documents
A SaaS business should establish clear legal boundaries with customers through its terms of service. SaaS terms and conditions can help protect your business by defining user obligations, payment terms, liability limitations, and intellectual property rights. For example, your terms should specify user conduct rules, such as prohibiting account sharing between organisations or limiting data export capabilities.
If you intend to use analytics data for your business development, you should consider obtaining the necessary rights or a licence to that customer data. Well-drafted terms also address service availability, data backup responsibilities, and termination procedures to prevent disputes and protect your business interests.
Business Operations Documents
Vendor and supplier contracts may be crucial for web-hosted platforms. Your contracts with cloud hosting providers such as AWS or Azure should include service level agreements, data security requirements, and liability allocations. Strong vendor agreements protect against service disruptions that could impact your customers and breach your own service levels.
Employee agreements are also important if you are a new SaaS business that is engaging employees to develop your platform. Your employment contracts must include comprehensive IP assignment clauses ensuring all software code, designs, and innovations created by employees belong to your company. For example, if a developer creates a new algorithm during work hours or using company resources, your agreement should clearly transfer ownership to the business.
Regulatory Compliance Checklist
Data Protection & Privacy
Australian businesses with an annual turnover exceeding $3 million (and certain other businesses below this threshold) must comply with the Australian privacy law. Regardless of legal obligation, all businesses should set up their operations to comply with privacy laws and ensure that the collection and handling of personal information are in accordance with the Privacy Act. You will need a privacy policy that explains the personal information you collect, how you use it, who you disclose it to (including whether it is disclosed overseas), and how customers can access or correct their information.
You must establish clear data security systems and data breach response procedures that comply with the law. Failure to comply with the Australian privacy law may result in hefty fines.
International customers located in Europe may trigger GDPR requirements. If you are entering into a business relationship with an EU company, they may require you to sign a Data Processing Agreement that outlines data processing responsibilities and security measures.
Consumer Protection
The Australian Consumer Law (ACL) applies to SaaS businesses and establishes mandatory consumer guarantees that cannot be excluded by contract terms. These guarantees apply to consumers, such as:
- individual consumers (people buying for personal, domestic or household use); or
- businesses, if the goods or services being purchased are under the $100,000 threshold.
Your services must be:
- performed with due care and skill;
- fit for purpose; and
- provided within a reasonable time (if the contract does not state a fixed time).
Your terms must avoid misleading and deceptive conduct by accurately representing your software’s capabilities and limitations. If you advertise “unlimited storage” but actually impose fair use policies, this could constitute misleading conduct under the ACL. You should include clear feature descriptions, pricing transparency, and honest performance representations to prevent inadvertently misleading your customers.
Unfair contract terms provisions prohibit terms that create significant imbalances between your rights and a customer’s rights. For example, clauses allowing you to change pricing without notice or terminate services without reasonable cause may be deemed unfair.
Additional Regulatory Concerns
There may be additional regulatory compliance matters you need to consider depending on your industry. For example, if you are operating a healthcare SaaS, the platform may fall under Therapeutic Goods Administration (TGA) regulations if the software qualifies as a Software as a Medical Device, particularly if it diagnoses, treats, or monitors medical conditions.
Financial SaaS platforms may need to comply with Australian Securities and Investments Commission (ASIC) requirements and may need to hold an Australian Financial Services Licence, depending on their functionality. Given the complexity and penalties associated with industry-specific regulations, make sure you discuss your platform models with a regulatory lawyer.
As a SaaS business, your clients may make substantial claims against you if your contract does not protect your interests. This factsheet outlines key clauses you can include to ensure both parties understand their obligations.
Key Takeaways
Establishing proper legal documentation is essential for protecting your SaaS business and ensuring regulatory compliance. It is essential that you:
- establish comprehensive terms of service that define user obligations, IP ownership, and comply with Australian Consumer Law;
- implement privacy policies, data handling and security procedures;
- secure employee agreements with strong IP assignment clauses to protect your software innovations;
- negotiate clear vendor contracts with service level agreements and proper liability allocations;
- understand industry-specific regulatory requirements that may apply to your particular SaaS platform; and
- conduct regular legal reviews to ensure your documentation evolves with your business and changing regulatory requirements.
If you need assistance ensuring compliance or a legal review of your SaaS company’s documents, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Conduct regular legal reviews as your business evolves, regulatory requirements change, or you expand into new markets. Key triggers for updates include adding new features, changing pricing models, expanding internationally, or when new regulations come into effect. Annual reviews are recommended as a minimum, with additional reviews when significant business changes occur.
Terms of service define the legal relationship with users, covering user obligations, payment terms, IP rights, and service limitations. A privacy policy explains explicitly how you collect, use, store, and disclose personal information. Both are required: terms of service for contractual protection, and privacy policies for regulatory compliance under privacy laws.
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