What is Dispute Resolution in SaaS?

A SaaS dispute is a disagreement between a SaaS business and one of its customers. Credit card billing errors can also go to the issuer: California’s Attorney General says consumers have up to 60 days after the bill is issued. SaaS businesses can encounter several types of disputes. These include:

• billing and payment
• service performance
• contractual disputes
• data and security disagreements
• account cancellation

SaaS dispute resolution, on the other hand, refers to the steps involved in resolving the disagreement. Generally, SaaS businesses use frameworks to ensure that disputes are handled correctly.

The term conflict is a general description of any disagreement between a SaaS provider and a client. A dispute will become a formal case if there is no resolution to the issue. One party might find it necessary to request restitution from the other in order to fully process and close the dispute.

There are three primary techniques of dispute resolution used in this process:

• Negotiation: Parties directly discuss the issues of the case to find a mutually agreeable resolution.
• Mediation: A neutral third party called a mediator facilitates communication and helps to reach an agreement to settle the dispute
• Arbitration: An arbitrator hears from each party on all issues of the dispute and makes a final decision on the case.

SaaS agreements usually contain a dispute resolution section within the document that outlines the process for mediation and resolving issues. This clause typically includes a step-by-step escalation procedure from negotiation to arbitration, agreed-upon resolution methods, and the governing law and jurisdiction to avoid ending up in a court case.

A credit card billing error can bypass the clause: the consumer has 60 days from issuance of the bill to dispute the error with the credit card issuer, according to California’s Attorney General.

Some key elements of an appropriate dispute resolution clause include:

• Clarity: Clear examples of what constitutes a dispute requiring mediation.
• Escalation: A precise, step-by-step process for attempting resolution of the case
• Specificity: Specific timeframes should be set for each stage of the dispute.
• Flexibility: Options to use more than one type of resolution for the disputes.
• Enforceability: A straightforward understanding of governing laws and jurisdictions.

A separate limitation of liability clause limits the damages the customer can collect.

ADR (Alternative Dispute Resolution) refers to any method of resolving disputes without litigation, as Cornell Law School’s Legal Information Institute defines it. Negotiation, mediation, and arbitration, as described above, are its most commonly used forms. The ADR process is intended to address SaaS disputes within a structured framework and a defined timeframe. When run on a web platform, these methods become online dispute resolution (ODR), which UNCITRAL’s non-binding 2016 Technical Notes describe for low-value cross-border sales and services contracts concluded electronically.

If your SaaS agreement mandates arbitration, you may consider proposing mediation first, as it usually involves lower costs and less formality than arbitration.