How to Write Terms of Service for Your SaaS

Be scrupulous with legal and operational language when writing your ToS (terms of service). While the process can be tricky, there’s no need to panic. We’ll break down the steps on how to build a Terms of Service that spells out the expectations for both your SaaS business and the people who use it. So let’s consider the critical sections, insights and tips to help you.

Create a brief opening statement that displays your brand’s voice and states the purpose of the ToS: to regulate the relationship between your company and users. Be clear when defining key terms early on (e.g., “Service,” “User,” “Content”). Use a table that summarizes the important sections for easy access.

Keep a professional tone and avoid technical or legal jargon throughout. Your introduction should make sense with your brand’s messaging.

Ask yourself: What is the best way to introduce my SaaS product so it will be informative and engaging?  Come up with a few options, test them with users, and then choose the one that resonates the most.

Ensure your users accept your Terms of Service. Consider a clickwrap agreement requiring a click on “I Agree,” or a browsewrap agreement stating that using the service constitutes agreement. Regardless of the method, just make sure it’s easy to see and understand. Also, include the date the ToS started and when it was last updated, and give a link to a printable version. 

Always be in compliance with relevant laws (e.g., GDPR, CCPA). Have a mechanism for users to withdraw consent, and if your SaaS targets minors consider age restrictions.

Investigate best practices for your industry and consult with legal counsel to draft a user friendly but legal way to obtain new user content.

Outline your account registration process, highlighting the required fields and the user’s responsibility for account security (e.g., strong passwords, two-factor authentication). Summarize account verification and recovery procedures, and be clear about restrictions on account sharing or transfer.

With regard to the collection and storage of user data, be in compliance with data protection regulations. Implement security to protect user accounts, and define the results of unauthorized account use.

For secure accounts and protecting user data, think about: What details do I need from users, and how can I keep their information safe? Balance the need for user data with privacy concerns, and implement industry-standard security practices.

Explain all the details related to pricing and payment, including: 

• Pricing Models: State if your SaaS is free of charge, offers a free trial, has a one-time fee, subscription-based model, or usage-based pricing.
• Subscription Details: Explain subscription tiers (e.g., Basic, Premium), the features within in each tier, and pricing for each tier.
• Billing Cycle: Show the frequency users will be charged (monthly, annually, etc.) and when transaction will occur (e.g., on the same date each month).
• Payment Methods: Display the payment methods accepted (credit cards, PayPal, etc.).
• Taxes: Clarify whether prices include taxes.
• Currency: Specify the currency used for the transaction.
• Refunds and Cancellations: Disclose your refund policy, detailing eligibility criteria, refund process, and timeframes. Show users how they can cancel their subscriptions.
• Price Changes: Reserve the right to alter prices, and detail how notifications of any changes will be made.

To create your payment terms, consider the following:

– What pricing model is best for my product and target audience?

– Is my pricing transparent and easy to understand?

– How can I create a fair refund policy?

To develop a well aligned strategy for your business and users, identify industry standards and analyze competitor prices.

Establish ownership of intellectual property rights by stating your company owns the software code, design, trademarks, and all other proprietary materials related to the business. Address ownership of content created by users within your platform, and detail how your intellectual property can be used.

To understand intellectual property considerations:

• Consult with Legal Counsel: Seek professional advice to ensure your ToS protects your intellectual property.
• User-Generated Content: Detail ownership of content created by users and establish guidelines for its use.
• Third-Party Licenses: If you use any third-party materials (e.g., fonts, libraries), make certain you have the necessary licenses and permissions.

By addressing these details, your intellectual property will be protected while still allowing users to leverage your platform’s capabilities.

This section describes the circumstances under which either party can terminate the agreement.

• Termination by User: Detail how users can terminate their accounts (e.g., through account settings, by contacting customer support). Clarify any notice periods required for termination.
• Termination by Company: Explain the reasons which entitle termination of a user’s account (e.g., violation of ToS, non-payment, account inactivity). Clarify the time frame you will provide to users before termination, if any.
• Consequences of Termination: Describe the consequences of an account termination, such as data deletion, loss of access to the Service, and refund eligibility (if applicable).
• Survival of Provisions: Specify which provisions of the ToS will survive termination (e.g., confidentiality, indemnification).

To create fair and broad termination provisions, keep in mind:

• User Rights: Users must have a clear path to terminate their accounts if they wish.
• Company Rights: Safeguard your interests by clarifying grounds for terminating user accounts.
• Data Handling: Clarify how compliance with data protection laws is achieved when accounts are terminated.

This part is about protecting yourself if the service goes down or has problems. Make it clear that your SaaS is provided “as is,” so you’re not promising it will always work perfectly or be error-free. Also, deny any implied warranties of merchantability or fitness for a particular purpose. To disclaim warranties:

• be super clear about what you’re not responsible for.
• consult a lawyer to ensure it’s all legal.
• set realistic expectations for users.

With a comprehensive disclaimer of warranties like this, you can protect yourself from legal trouble and still be honest with your users.

The goal of this section is to cap your financial responsibility should disputes or damages arise from the use of your SaaS.

• Types of Damages: Specify the various damages covered by the limitation. For example direct, indirect, incidental, consequential, or punitive damages.
• Monetary Cap: Set a maximum amount of liability, either specific in dollar amount or a multiple of the fees paid by the user.
• Exceptions: Determine situations where the limitation of liability may not apply (e.g., gross negligence, intentional misconduct).

To limit your liability:

– Consult legal counsel: Seek professional help to be sure your limitations are in compliance with applicable laws and industry standards.

– Consider insurance: Investigate liability insurance options to mitigate any additional potential risks.

– Balance protection and fairness:, Ensure your limitations are reasonable and don’t unfairly burden users.

This section explains the resolution process with any disputes between you and your users.

• Method: The options are arbitration, mediation, or litigation.
• Process: Describe the resolution process, including how to initiate the dispute, timelines, and associated costs.
• Governing Law: Detail the jurisdiction whose laws will govern the dispute resolution process.
• Venue: Determine where any legal proceedings will take place.

This section explains any discord caused by the ToS and the legal jurisdiction which will govern them. Opt for the state or country whose laws will apply to the agreement.

To ascertain the governing law:

• Consider Your Location: It’s common to choose the state in which your headquarters are located.
• Factor in User Base: If you have global users, choose a jurisdiction with laws that are favorable to businesses and online services.

Consider  additional provisions that may not easily fit into other sections of the ToS.

• Severability: State if any provision of the ToS is invalid or unenforceable, the remaining provisions will stay in full force and effect.
• Entire Agreement: Clarify that the ToS constitute the entire agreement between you and the user regarding the Service and supersede any prior agreements.
• Assignment: Be clear on whether each party can assign the ToS to another without the other party’s consent.
• Notices: Explain how communication will take plce with users (e.g., via email, in-app notifications) and how users can contact you.
• Force Majeure: Include a force majeure clause to excuse non-performance due to events beyond your control (e.g., natural disasters, government actions).
• Waiver: Show that a failure to enforce any provision of the ToS does not constitute a waiver of that provision.