Red Flags in SaaS Agreements: Protect Your Business

SaaS agreements often favor vendors. Before clicking "I agree," watch for these red flags that could cost your business.

Pricing and Payment Red Flags

1. Auto-Renewal with Price Increases

Many SaaS contracts auto-renew at higher rates. Look for language allowing unilateral price increases.

2. Long Lock-In Periods

Annual contracts with no monthly option and cancellation fees can trap you with software that doesn't work.

3. Hidden Usage Fees

Base subscription might be cheap, but API calls, storage, and overages can be expensive.

Data and Security Red Flags

4. Vendor Owns Your Data

Your data should remain yours. Watch for language granting the vendor rights to your data.

5. No Data Portability

Can you export your data? In what format? If exit is difficult, you're locked in.

6. Vague Security Commitments

Look for specific security standards (SOC 2, ISO 27001), not just "reasonable security measures."

Service Level Red Flags

7. No SLA or Weak SLA

99.9% uptime sounds good, but what's the remedy? Credits don't compensate for business losses.

8. Broad Exclusions from SLA

"Scheduled maintenance," "third-party issues," and "force majeure" can exclude most outages.

Liability Red Flags

9. Liability Cap at Fees Paid

If the vendor's breach causes $100K damage but you only paid $1K/month, you're underprotected.

10. No Indemnification for IP Claims

If someone sues you for using their software (patent/copyright), the vendor should defend you.

Termination Red Flags

11. Unilateral Termination Rights

Can the vendor terminate at any time? You need notice and transition time.

12. Data Deletion Upon Termination

How long do you have to export data after cancellation? 30 days minimum is reasonable.