Overview
Negotiation and counterparty dynamics
To help answer common questions regarding contract negotiation in SaaS agreements, we’ve put together a refresh of our Contract Benchmark Report. This report contains insights about common terms in SaaS commercial agreements, designed to aid decision-making and speed up contract signing.
We based the report on data from over 1,000 contracts using the Common Paper platform, coupled with insights from the Common Paper Committee, which consists of attorneys from various practice backgrounds. You can also find our previous 2022 report here.
Contract data, stats, and expert opinions
Customer roles and titles
The signatory levels on the customer side of Cloud Service Agreements are:
| Customer Role | % of Signed CSAs |
|---|---|
| Executive (including CXO, VP, Founder) | 74% |
| Director (including Director, Principal) | 18% |
| Manager (including Manager, Lead) | 8% |
AI clauses in agreements
Clauses regarding the use of customer data for AI and ML have been increasing in prevalence. In Q1 2023, under 5% of CSAs mentioned AI, while by Q4 2023 this percentage rose to 25%.
Time to sign by customer size
The median contract signing time varies by company size:
| Customer Company Size | Median Time to Sign |
|---|---|
| SMB | 3 days, 1 hour |
| Mid-market | 3 days, 20 hours |
| Enterprise | 4 days, 9 hours |
Commonly negotiated terms
Commonly negotiated terms in Cloud Service Agreements include the following:
- Fee amount and structure
- Auto-renewal/nonrenewal notice
- Invoice period
In NDAs, commonly negotiated terms include:
- Term of confidentiality
- NDA term
- Chosen courts
Insurance requirements by company size
Vendors are often required to carry insurance to mitigate risk, particularly for larger customers:
| Customer Size | % of CSAs w/ Insurance Minimums |
|---|---|
| SMB | 6.5% |
| Mid-market | 11.5% |
| Enterprise | 28.6% |
Cloud Service Agreement
A Cloud Service Agreement governs the sale and use of cloud services or SaaS, including business and legal terms:
Subscription details
- 70% of CSAs are annual, 19% monthly.
- 90% include automatic renewal, with 29% including an automatic fee increase upon renewal.
Payments
- Most common payment period: “30 days from customer’s receipt of invoice” (62% of CSAs).
- Invoicing: 48% are monthly, 46% annual, 5% quarterly.
Dispute resolution
Disputes are managed through courts or binding arbitration. Commonly used governing law and chosen courts by CSAs:
- 71% use Delaware.
Risk mitigation
Covered claims define obligations regarding legal liabilities:
- 76% of CSAs included default positions on covered claims.
Add-ons
- 39% of CSAs include a Service Level Agreement (SLA).
- 37% include a security policy.
- 45% include some form of publicity rights.
Mutual NDA
Location
Common governing laws:
- Delaware: 63%
- California: 16%
- New York: 10%
Time
Most common NDA term lengths:
- 1 year: 74%
- No fixed expiration: 36%
Confidentiality
Most common term of confidentiality: 2 years, comprising 56% of NDAs.
Design Partner Agreement
Partner and provider obligations
Partner obligations:
- 72% include regular feedback participation; most commonly every twice monthly (46%) or once monthly (36%).
- Provider obligations: Discounts on future subscriptions appear in 43% of agreements.
| Discount Percentage | % of Design Partner Agreements with Discount |
|---|---|
| 50 percent | 40% |
| 20 percent | 21% |
| 30 percent | 14% |
Fees and term length
Common durations of design partner agreements:
- 3 months: 27%
- 6 months: 22%
- 1 year: 19%