Software-as-a-Service: Acceptance Clause

Mar 28, 2016

Software-as-a-service (SaaS) transactions continue to be some of the most difficult agreements to negotiate because enterprises use their leverage to demand working from large standardized agreements meant to be used for the entire software procurement process. Unfortunately, the appropriate terms for SaaS applications usually do not fit well into these one-size-fits-all agreements.  Consequently, more time and effort has to be put into retooling the language, such as the “Acceptance" clause.

SaaS Deemed Accepted Upon Receipt of Credentials

One way to approach acceptance is to acknowledge that the SaaS is deemed as accepted upon the delivery of the access credentials. This method works well for the parties in situations where there is not a lot of configuration needed to complete the transaction. Publishers will likely argue that acceptance needs to take place immediately for revenue recognition purposes. However, agreeing that the SaaS is deemed accepted upon receipt of credentials is not necessarily in the best interest of a buyer in situations where configuring the application could take months before the buyer can actually deploy the software to the end users.

Trials Instead of Acceptance

An alternative to accepting SaaS upon receipt of credentials is to agree to a trial (paid-for or free). Free trials are often limited in duration, number of users, and in scope, such as testing. The publisher can still profit from a free trial because it can charge for the configurations as professional service fees. If configurations are not necessary, which would be very unlikely, then there will likely be a fee for the trial to compensate the publisher for the backend setup.

Acceptance Not Addressed

Because acceptance can be a difficult subject, some SaaS contracts omit acceptance terms from the language all together. In these situations, it may be beneficial to add a short acceptance term that acceptance is automatic after certain conditions are met, such as the passing of a set period of time.

Addressing acceptance language and other important terms in a SaaS agreement can be tricky. It can be helpful to seek advice from an attorney experienced in drafting, negotiating, and reviewing SaaS contracts to ensure that the final agreement will meet the needs and expectations of the parties.