Software as a Service agreement – How do I draft the termination clause?

When drafting your Software as a Service (“SaaS”) agreement, you should include a detailed termination clause that identifies how users can successfully terminate the agreement and their subscription, and provide you with a variety of options to terminate the user’s account.

Depending on the way in which your payments are collected, you should identify when the payment will end on termination. For example, will you cease debiting the user’s account at the end of the month in which notice was provided? Or, will it be 4 weeks after termination?

Termination

You should list all of the relevant circumstances in which you would like to terminate the agreement including if:

• the user breaches any of these terms, including your website terms of use or privacy policy;
• you suspect that the user is attempting to reverse engineer or hack your software;
• you consider that the working relationship has broken down;
• the user becomes become bankrupt; or
• for any other reason outside your control which means that you cannot provide the user with the required software.

Privacy, Intellectual Property, and Confidentiality

You should also provide information to the users about how data can be collected from their account before the termination of their account. For example, can they download their files prior to termination to ensure their information is not lost? Do they have access to this information and is it retrievable if they reinstate their subscription. This should also be addressed in the intellectual property and confidential information clauses of your SaaS agreement.

There are also some legal requirements for you to keep documents for a certain period of time. Personal information may be deleted when it no longer required for a purpose for which it may be used or disclosed under the Privacy Act. It must be deleted or destroyed securely. You should consider keeping the information for a reasonable time to allow users enough time to access their information, but you do not need to specify this in your agreement. Other records must be kept for a number of years, for example financial, company and employment records must be kept for 7 years and tax records must be kept for 5 years in Australia.

Conclusion

It is important to include a well-drafted termination clause in your SaaS agreement to ensure that you and your users have a structure by which to terminate the agreement. A well-drafted termination clause will also help you avoid disputes by clearly setting out the circumstances in which you will terminate a user’s subscription to your software immediately and without notice. If you require any assistance in drafting a SaaS agreement, or if you require advice on problems you are having with your users, contact us on 1300 544 755 and speak with one of our experienced online solicitors today.