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I have a B2B SaaS web app. In most cases my clients are small or medium sized organizations and we have annual contracts. In other words, they sign the contract, according to which they are 'locked in' with my service for 12 months.

Now, I have to email them the contract, wait for their signature, then ask them to enter credit card information on my website. When they do, they also agree to my ToS and Privacy Policy by clicking the checkbox.

Question: Can I have customized ToS for each client (they are logged in, so I know who they are) and avoid sending the contract at all? In ToS I would write the monthly price, start date, duration of the contract, etc.

Is it legally binding?

Update: I'm in the US

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2 Answers

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A contract need not be in writing. You can have an oral contract. For example, the following would be legally binding (in the U.S. at least):

Bob: I'll buy your laptop for $100

Joe: Deal! (shake hands, exchange money and laptop)

So if you can have an oral contract, you can certainly do a contract online, and you can all it a contract and not a TOS. Once they click "I agree", then, voila!, you have a contract. The web page that does this should make it very clear that the customer is entering into a contract and the contract terms should be on the same page.

It would be good practice to email the contract to the customer and yourself for record keeping and to print (to paper or pdf) and store somewhere safe.

Note the reasons that people do paper contracts is that they are to some extent safer. It is harder to argue forgery and the like. You don't say how much your customers are paying, but if it is a large amount, you might be better off going through the hassles of a paper contract.

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Great answer. I wonder why big companies have those contract at all. I don't think they are worried about forgery that much. Are they just being old-fashioned? I definitely see the benefits of NOT having contracts, but my concern is that "everybody does it". – Salmon Jun 10 '12 at 2:23
Big companies do it all the time. Think about the last time you got a credit card. See en.wikipedia.org/wiki/Standard_form_contract – Kekito Jun 10 '12 at 16:30
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What you are suggesting does not make the terms not binding. (How's that for lawyer double-speak?) In other words, if it's binding in paper, then doing it electronically doesn't make it not binding.

There are, however, some caveats. Mostly, you have to make sure that you present it to them correctly on-line and keep good records about what they agreed to. And, if your customers are international, their country's laws may be different. And, there are some things that have to be in paper. (In some states for example, agreements to pay attorneys fees have to be hand-signed.)

So, your best bet is to ask your attorney about how to do it right.

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