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We are currently developing a SaaS based software service and offer it to our customers as a monthly/yearly contract basis.

So in essence, they will pay us to host/maintain their stuff on our servers.

We are about to approach our prospective customers.

Do we need to get our contracts written professionally? Or are there any common templates I could use.

All I think I would really need is an agreement that the customers of mine have signed up for a monthly service from us and they agree to pay us monthly at the start of the month.

Can I have some thing like that on our letter head and have them sign or is it a complicated process than I am thinking. Can some one please suggest me any ideas.

Thank You in advance.

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5 Answers

Here are two shortcuts:

  1. Find four or five services that are similar to yours. Look at their licenses (they are almost always up on the web). Think about which provisions make sense for your site and which would need to be modified. Edit them into one big document that makes sense for you. Show the whole thing to a lawyer for editing, which should only take 2-3 hours of a lawyer's time.

  2. Or - find the site that is most like yours, preferably something that doesn't compete, where you know the creators. Ask them for permission to reuse their contract. Take their contract and change the names. When you can afford your own lawyer, have them check the contract and modify it appropriately. If the contract you are copying was written by a lawyer and the conditions are similar to yours, it's probably a reasonable contract to get started with.

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The very first thing to say, when asking for legal advice, and the first thing to think about is which legal jurisdiction you are working in. If you are based in the United States the various contract laws of many of the states are pretty similar but they are by no means identical. The laws of other countries - for example in Europe or the Far East - diverge a great deal more.

This is just as important as saying what programming language you are using when seeking advice on a site like stackoverlfow.

Almost all lawyers in this field (and I am one) do exactly what Joel suggests: we reuse each other's work. In most cases we start off with books of precedents and then rewrite them to suit our needs, picking up ideas from other contracts we see out there and taking input from clients as well. A good firm with lots of experience will have plenty of its own "in house" material, but that will often include a considerable amount of commonly used material (what we call "boilerplate") that is out there.

Obviously editing other people's contracts might be a copyright violation depending on your jurisdiction and how original they were in the first place, but certainly in my jurisdiction (England) people aren't often sued for such violations. If you do it with permission, all the better of course.

If you go to see a lawyer they will appreciate your having done some preparatory work. In particular you will need to think carefully about things like:

  • how payment will work (not just how much but when and how)
  • how the contract will end (do you give notice or can you cancel it if they don't pay etc)
  • what exactly you are promising to do - in the case of SaaS you will probably be guaranteeing a certain level of service availability, but you'll be taking the site down some times for emergency maintenance (if you are anything like any of the sites I know) and you'll want to make it clear in the contract what you can and cannot do like that
  • how will terms change - eg prices increase - over time?
  • is there any element of confidentiality (always a tricky point)

.... and so on.

Also rules differ for commercial and consumer contracts in many places (in Europe for instance) and that might be a factor.

If you have thought through all this, and perhaps produced a rough draft that makes this all clear, and present it to a competent lawyer then you should save lots of time and money.

A good lawyer ought to be upfront about their experience. Ask them if they drafted any SaaS or similar contracts before. Contract drafting is mostly standard stuff, but there are peculiarities of websites that make a difference.

Rates will vary depending on where you are (see above).

If you are in England or Wales (unlikely I know) then you are welcome to have a copy of one of the contracts I use as the (or one of) the templates Joel suggests using. If anywhere else, I can't help you.

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Thank you for your response. This made perfect sense. I can definitely find few companies like ours and look up their agreement and prepare a rough draft and then approach a lawyer.

But can I approach any lawyer instead of "high profile" ones I see when I search "software attorneys" online. Because we cannot afford expensive fees. Also, we are from a small town in midwest so I have no access to attorneys who specialize in this kind of work.

So,could you suggest me the kind of lawyer I should be looking at? And approximate hourly rate a lawyer can be gotten?

I have been an avid reader of your blog for a while now and thank you much for your guidance.

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There are some documents an entrepreneur can copy from other companies reasonably successfully - for example, NDAs and privacy policies.

However, when it comes to agreements that go to the heart of your business, the likelihood that you can properly protect yourself by copying someone else's agreement is somewhere near zero. And when the service offered is relatively sophisticated, as is the case with SaaS applications, the challenge is even more formidable.

Please check out Top Ten Mistakes of Small to Mid-size Tech Companies, and download the document it links to, then see whether there are any other relevant posts on my blog. You are welcome to follow up directly.

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

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Have a look here: http://softwarelicensing.tv

There is a EULA template and a case study from a software business running on a model that sounds similar to yours.

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