## Overview Contracting can be difficult, especially without a baseline for creating your agreement. What is a normal, or _market_, position to take on any given term? How do you increase the chances your customer will sign your contract with minimal redlines? To help answer these questions, we’ve put together the Common Paper Benchmark Report. We used two sources to create this report. First, we analyzed data from the contracts from more than 150 US-based B2B SaaS companies, managed through the Common Paper platform. We coupled that with the experience of the [Common Paper Committee](https://commonpaper.com/committee/), which is made up of over 35 attorneys from large enterprises, startups, big law firms, and boutique specialists. We’ve published insights below about the terms within the [Mutual NDA](https://commonpaper.com/standards/mutual-nda/) and [Cloud Service Agreement](https://commonpaper.com/standards/cloud-service-agreement/) (CSA). Note that the CSA is also often referred to as an MSA, and regardless of the name, we’re talking about contracts covering the sale and use of a SaaS or cloud product. The NDA and CSA are two of the most commonly signed agreements by SaaS companies, and we’re looking forward to covering additional contract types in future reports. ## Mutual NDA A mutual non-disclosure agreement allows for the exchange of confidential information between two parties. In the case of SaaS companies, NDAs are often signed early on in the conversations between a vendor and prospective customer or between potential partners. They might be needed in order to share security information, a SOC 2 audit report, or a product roadmap. Some of the most commonly varying terms in NDAs have to do with locations and lengths of time. ### Location There are two concepts that use location in an NDA: governing law and chosen courts (also known as jurisdiction). Each state (or province, country, etc.) has different laws. Setting the governing law clarifies the set of laws under which the contract will be interpreted. Chosen courts specify where a lawsuit related to the contract can be filed in the event of a dispute. More than 96% of NDAs choose the same state for both governing law and chosen courts. The most commonly chosen states are: - Delaware: 46% - California: 22% - New York: 12% ### Time There are two terms related to time in an NDA: NDA term(also known as agreement term)andterm of confidentiality. NDA term is the length of time for which the contract is valid. Practically, this is the time period for sharing confidential information under the NDA. The most common NDA term lengths are: - 1-year: 51% - 2-years: 17% - 3-years: 8% About 25% of NDAs have no fixed expiration but may be terminated at any time. Term of confidentiality refers to how long the parties are subject to confidentiality obligations and must protect confidential information. 68% of NDAs have the same NDA termandterm of confidentiality, 52% of NDAs have a 1-year confidentiality period, and 15% have no expiration period so the confidentiality obligations last forever. There is a downside to proposing NDAs with indefinite terms of confidentiality. Agreements proposed with a finite term of confidentiality are 15% more likely to get signed. ### Beyond the Benchmark Data We often hear questions from founders about terms that don’t appear in Common Paper agreements, or about why certain terms were set the way they are. Here’s the committee’s point of view on a few of these terms: - **Residuals** in NDAs can be a contentious topic... After much discussion, the Common Paper Committee decided to omit the concept of residuals from the standard terms. - The Common Paper NDA Standard Terms allow companies to keep confidential information in record retention and backup systems. ## Cloud Service Agreement A cloud service agreement is a contract used to sell cloud services or SaaS in a vendor-customer relationship. The CSA includes the business terms of the sale, like the product and fees, as well as the legal terms that govern the relationship between the vendor and the customer. ### Subscription details Subscription period is the length of the contract, and it relates to whether there is an automatic renewal. 95% of CSAs use a 1-year subscription period. 90% of CSAs include automatic renewal, and 21% include an automatic fee increase upon renewal (most commonly 7-8%). In 95% of auto-renewed contracts, customers agree to a 30-day non-renewal notice period... ### Payments Payment period defines how long a customer has to pay the vendor. You might also hear this called Net30 (a 30-day payment period), Net60, etc. Users choose “30 days from customer’s receipt of invoice” most often in Common Paper, accounting for 62% of signed CSAs. Invoice period is how frequently a vendor will send invoices to the customer. 76% of CSAs use annual invoices, which mirrors the most common 1-year subscription period. ### Dispute resolution Governing law refers to which state’s laws a court will apply to resolve a dispute about the contract... 73% of contracts choose Delaware for governing law, while 82% choose Delaware for chosen courts. ### Risk mitigation Also known as indemnity, covered claims are a contractual promise by one company to pay for certain kinds of losses experienced by the other company... 78% of CSAs included these default positions on covered claims. ### Add-ons A service level agreement or SLA defines the level of service expected from a vendor... 64% of CSAs include one. Some Cloud Service Agreements include acceptable use policies... 14% of Common Paper CSAs include an acceptable use policy. ### Beyond the Benchmark Data We often hear questions from founders about terms that don’t appear in Common Paper agreements... ### Late payment penalties Late payment penalties can appear in software contracts as a vendor’s way to ensure timely payment... ### Representations and warranties The CSA Standard Terms includes a few baseline representations and warranties from both vendor and customer. ### Termination for convenience The right to terminate for convenience allows one or both parties to terminate a contract at any time for any reason or no reason at all.