If you are selling SaaS, you and your customer must agree on a set of terms and conditions under which both parties agree to do business. Some of these terms will govern what you can or cannot do as a provider, and other terms will apply to your customer. These terms and conditions are collectively known as an MSA or Master Services Agreement.
MSA s also known by several other names, such as
- Software Services Agreement
- Cloud Services Agreement
MSA not only governs the initial sale but also any amendments that happen during the contract.
The basic building blocks of an MSA are usually the following:
- Definitions — This section contains general definitions of the terms used throughout the agreement
- Services—This section defines the specific services performed by the provider and the high-level rules around how such services will be provided, e.g., updating the software in the cloud regularly and cases where the provider can turn off such services as well.
- Use Restrictions—This section defines what the customer can or can't do with the SaaS, e.g., that the customer cannot sell this service to another customer.
- Customer obligations—This section outlines customer responsibilities regarding using SaaS, e.g., they will not reverse engineer the code, maintain a secure environment to access SaaS, etc.
- Service Level and Credits — This section defines how the provider provides customer support, i.e., what time/timezone, how they provide it (phone, email, messaging), and what monetary credits they are supposed to provide to the customer in case of downtime.
- Data Backup—This section defines the provider's backup policy, i.e., how fast the provider can restore services if the system fails. It also defines how far back (usually in days) the backup goes.
- Security—As the name suggests, this section defines the provider's security posture, e.g., whether they have GDPR / SOC 2 and how the customer is required to maintain an authenticated and secure environment to log on to the provider's software.
- Fees and Payment—Fees are usually covered in the Quote/Proposal. Still, this section determines what happens when the customer fails to pay within a stipulated period of time or altogether.
- Confidentiality—This section determines what information exchanged between the two parties can be considered Confidential, how to treat such information, and what steps to take if this information were to be made public.
- Intellectual Property Rights—This section covers primarily the intellectual property rights for customer data, e.g., how (if at all) the provider can use customer data to improve their services or for other purposes.
- Representation and Warranties—This section is primarily legalese, so one needn’t worry about whether both businesses are in good standing.
- Indemnification—This can be a tongue-twister for folks without a legal background, but in plain English, it means what scenarios one party covers for the other. For example, if the customer uploads any data to the provider that is against the law of that region, then the customer protects/indemnifies the provider of any loss, i.e., if someone sues the provider for possessing such data.
- Limitations of Liability — This section determines the monetary damages (and their limits) when either party breaches the contract. Typically, the cap on the limit is not more than the amount paid by the customer, but the exclusions to this rule could be in the cases of gross negligence, e.g., when there is a data breach
- Terms and Termination—The term/length of the contract could be covered in the Proposal/Quote or mentioned here as well, including cases where the contract can be terminated prematurely and any renewal clauses.
- Miscellaneous — Anything that is not covered in the sections above, e.g., publicity clause (how each party can use either other’s name publicly), which state jurisdiction will apply in case of issues, etc.
Do you have sample MSAs that I can use?
The following is the Google Docs link to a detailed MSA. You can use/edit it if you have larger customers who often expect/demand a comprehensive MSA.
However, if you have smaller customers (e.g., startups), a basic version will also work.
I recommend using the YC sales template (.docx; download) or a new template built by our friends at Common Paper.
Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.
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