In many software development agreements, the customer has to accept the software before the contract is complete. If the product is not acceptable, the parties have a contractually described way to address issues before final payment is due. However, in software-as-a-service (SaaS) transactions, SaaS providers often argue that the SaaS is available upon execution of an agreement and software delivery and acceptance is not required.
Although physical delivery of software is not necessary for SaaS, delivery is still an important issue to address. A business needs to ensure that the proper access credentials are delivered in accordance with the terms of the agreement. Businesses should not start paying pursuant to the agreement until it can verify that the access credentials have been delivered and enabled with the appropriate level of access.
However, some SaaS may involve a lengthy configuration period after valid access credentials have been delivered. In this situation, the business could negotiate paying a fee for the configuration services, and a separate SaaS fee after the configuration is complete. For projects where there is no configuration period, a business could propose provisions allowing for the cancelation of the service fees if the SaaS does not operate as promised.
Another solution for addressing acceptance is for the business to use a trial period to test the SaaS in its production environment (e.g. 30 days). Acceptance could be made automatic upon continued use after the trial period has expired.
The parties should contemplate whether it is appropriate to include acceptance terms in a SaaS agreement. If there are no acceptance terms in the agreement, a business should be prepared to propose solutions for adding acceptance terms. Acceptance terms can be difficult to negotiate for both parties, but it is a worthwhile discussion so that each party has a clear expectation of how and when the SaaS will actually be available for use, that the SaaS operates as expected, and when payments will begin. It can also be helpful to employ the assistance of legal counsel to propose or negotiate acceptance terms, as well as conduct a review of other important terms and conditions of the transaction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
