Software as a Service Agreement – How do I draft the payments clause?

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Table of Contents

• Terms of the ‘Payments’ Clause
• Multiple Account Users
• Conclusion

When drafting your Software as a Service agreement, you should ensure that you include a clause that addresses payments for your services. You should include details about what forms of payment you will accept, for example, will you accept PayPal, Bitcoin, credit cards or debit cards? If the subscription fees are debited on a regular basis, how often will it be debited, for example, will it be on a monthly or fortnightly basis? You should also detail whether a credit card is required to start a subscription, as some businesses allow users to sign up to their free account to begin with and then move up to the paid subscription later on.

Terms of the ‘Payments’ Clause

You should include a clause that states that the subscription must be paid in order for the user to have continued access to the account. You should also include the process to address if a payment is refused. Usually the business will have an account manager contact the user to let them know that the payment has failed and that, until such time as the payment details are updated, they will not receive the service. You may consider providing users with 5 business days to address the payment refusal. A typical issue with these types of payments is that the payment is rejected because the user’s bank details change, expire or their cards are stolen rather than the user wanting to cease using the subscription.

If payment is then not made within that period, you should consider including a clause that indicates that the business may lock the user’s account without notice to the user. The user will not be able to use their account or use the software, any of the user’s data in the account will be deleted and not recoverable during this period. Because of the Australian Privacy law and document retention laws in Australia, you may have to retain some of this information for a set period of time. See our previous article: Software as a Service Agreement – How do I draft a termination clause?

Multiple Account Users

You may have users that are also businesses that have a number of accounts with your service, for example staff of one business may use the same software to track their shifts. If you have business or multi-account holders you can provide them with the option to update, increase or decrease their subscription without having to re-subscribe or create new accounts. You should outline how users’ payments can be altered and updated, and what the lag time will be for changes to their subscription fee. This usually depends on their account subscription.

Conclusion

It is important to include a well-drafted payment clause in your Software as a Service agreement, as this is regularly an issue with software subscriptions. To avoid disputes, you can make it clear that non-payment is a breach of the Software as a Service agreement, giving you the right to terminate. At LegalVision, we have extensive experience within online businesses and start-ups. So if you’re in need of legal advice in regards to a Software as Service agreement, contact us on 1300 544 755 and speak with one of our experienced online solicitors.