A SaaS Agreement governs access to cloud-hosted software services, typically under a subscription model. This playbook covers service uptime, data ownership, termination, and liability limitations for cloud-based offerings.
Why This Matters: Imbalanced indemnities and uncapped liabilities can expose parties to excessive financial burdens and litigation risk.
Negotiation strategy
If you're the Provider:
Ensure indemnification obligations are mutual and liability caps are reasonable. Negotiate for exclusions on indirect damages to limit exposure.
If you're the Customer:
Seek to limit indemnification to direct damages and ensure liability caps are proportionate to the contract value. Advocate for clear definitions of indemnifiable events.
Essential elements
1
Indemnification Obligations
Mutual indemnity for third-party claims.
2
Liability Cap
Maximum financial exposure limit.
3
Exclusions
Define non-indemnifiable events.
Action framework
ACCEPT
Propose edits if liability caps are absent or excessively high.
EDIT
Reject clauses that impose unlimited liability or one-sided indemnities.
ADD
Add clauses if indemnification or liability provisions are missing.
PRO TIP
Always align indemnity and liability terms with your company's risk management policies.
Example clauses
FAVORABLE
Balanced Indemnity Clause
"Each party agrees to indemnify, defend, and hold harmless the other party from any third-party claims arising from its own negligence or willful misconduct, subject to a liability cap of [specified amount]."
NEUTRAL
Standard Indemnity Clause
"The indemnifying party shall indemnify the other party for direct damages only, with a liability cap equal to the total fees paid under this agreement."
UNFAVORABLE
One-Sided Indemnity Clause
"The Contractor shall indemnify the Company for all claims, without any liability cap."
Fallbacks
High-Risk Projects
In high-risk projects, consider increasing liability caps and including specific indemnity triggers to address potential hazards.
Cross-Border Transactions
For cross-border deals, ensure indemnity clauses comply with international laws and address currency fluctuations in liability caps.
Technology Contracts
In tech contracts, focus on indemnities related to IP infringement and data breaches, with tailored liability limits.
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