Survival in SaaS Agreements

Background and Overview

Most commercial contracts have secondary obligations or rights that will need to survive termination of the agreement and a SaaS Agreement is no exception. The relevant provisions that will need to survive termination are set forth in a section with the heading “Survival.” Usually taking the form of a subsection, Survival is most often found as a subsection in the section addressing Term and Termination, or under Miscellaneous.

My best practice is to address Survival in the section on Termination due to the conceptual alignment, but there isn’t a legal distinction between having it part of that section or part of the Miscellaneous Section. Addressing Survival in Miscellaneous, which should be the final section in a SaaS Agreement when employed, is ultimately a practical approach as waiting until the end of the agreement when all prior sections have been finalized and numbered is a good way to avoid drafting errors or omissions in the Survival section.

Survival is a fairly straightforward section in a SaaS Agreement once you know and understand the obligations and rights that need to be captured and referenced. The hard part is ensuring you have the necessary specificity in your references to the correct sections in the agreement. In this article, I’ll share best practices and discuss the key concepts and considerations to know when drafting, reviewing, and negotiating the provisions to include in Survival. ?

Best Practices for Drafting Survival

Because of the referential nature of a Survival section, I don’t have a best practice example to share. So, the discussion will focus on the discussing types of obligations and rights that should survive termination and that you’ll need to account for in the provisions of your SaaS Agreement. To organize the discussion, I’ll discuss the underlying reasons that these obligations need to survive termination and note the relevant provisions concerned.

The reasons for a provision surviving termination are rooted in protecting the parties, and so the provisions that should survive are those that offer protection while the agreement is active and in force. Those provisions speak to governing law and venue and/or dispute resolution, confidentiality of information, intellectual property, payment, indemnification, limitation of liability, and responsibilities triggered upon termination.

Post-Termination Disputes and Related Surviving Provisions

Many of these provisions share a reason for needing inclusion in Survival—they relate to a post-termination dispute. After an agreement terminates, a party has whatever time the relevant statute of limitations allows to file a claim against the other party. For this reason, it’s important to ensure that the parties are obligated to follow the provisions that they agreed would govern a dispute or claim that arose during the contract’s term.

Governing Law, Venue, and Dispute Resolution

Thus, Survival must always include the governing law, venue, and any mandatory dispute resolution provisions so they continue to govern any dispute or claim that arises post-termination of the SaaS Agreement. The provisions that speak to governing law and venue, or dispute resolution may be in a standalone section or be subsections. Be sure to include and correct references to the specific subsections in the Survival section.

Limitation of liability

Limitation of liability must also be included in the Survival section to ensure it applies to any liability that is claimed post-termination of the SaaS Agreement. It should be referenced in its entirety. If the parties have negotiated different liability caps in different subsections, make sure there’s no ambiguity on those provisions surviving termination but checking your subsection references.

Indemnification

Indemnification should also be included to ensure that any third-party claims that arise within the statutory period are going to be indemnified in the same manner proscribed for when the agreement was in force. But take care to be very precise when drafting, reviewing, and negotiating how indemnification obligations are included in the Survival section because, in a SaaS Agreement, the indemnification is never truly mutual. After all, an indemnity for claims of intellectual property (“IP”) infringement is only going to be operative as to the SaaS provider. Indeed, some SaaS providers draft the Survival section so that not all its indemnifying obligations survive.

SaaS providers should agree to include the provision with the indemnity for third-party claims of IP infringement because they’ll want the benefit of the control and settlement of defense language. However, any indemnification for other claims, such as breach of security or confidentiality may not be included. A SaaS Customer will need to check to ensure that the references are complete and cover all indemnification obligations agreed to in the SaaS Agreement for the applicable term.

When it comes to the Survival section, the best practice is to include all relevant provisions governing disputes and claims during the contract’s effective period. While I wouldn’t go as far to say it’s bad faith to try to do otherwise, I do not think it’s worth negotiating the survival of a provision that you’ve just agreed would govern during the SaaS Agreement’s term.

Confidentiality of Information

Maintaining the confidentiality of information that was exchanged under the SaaS Agreement is an obligation that must survive termination. The parties need the obligation to maintain confidentiality to survive and the various mechanisms to related to notice of any breach or demand to disclose pursuant to a subpoena or legal proceeding. For this reason, it’s the best practice to reference the entirety of the section on Confidentiality and include the important collateral obligations as noted above.

Post Termination Responsibilities

In SaaS Agreements, there are often post-termination responsibilities such as taking some action related to customer data, transition services, or making payments on outstanding balances. See my article on Effect of Termination for examples. Any obligations or rights triggered upon termination need to be included by reference in the Survival section.

Intellectual Property

The best practice is to include the provision on the IP rights of the parties in the Survival section. The rights of the SaaS provider to its IP and the SaaS customer to its data need to survive termination.

As noted above, the rights and obligations triggered by termination can involve continued access by the SaaS provider to the SaaS customer’s data, and potentially to the SaaS provider’s software by the SaaS customer. So, the provisions on IP rights will need to survive termination.

With respect to the survival of IP rights, this may require more than one section or subsections to be referenced. IP rights of the SaaS provider may be addressed in an IP Ownership section and there may be additional concepts to capture in the section on License Grant and License Restrictions. The customer’s right to its data can be addressed in various sections and will need to be referenced correctly also.

Payment

The Payment section should survive in its entirety. This way the obligation of the customer to pay and the related terms on late payments, taxes, and so on, will continue in the event the customer is not current on its account balance at the time of termination.

Conclusion

Once you understand the reasons that certain provisions should survive termination of a SaaS Agreement, it’s a matter of identifying the related concepts in the terms and conditions, and then successfully referencing the relevant sections and subsections correctly.