Summary
Disclaimers are important for defining the boundaries of the services provided under a SaaS contract.
- Purpose: disclaimers identify what the supplier is not promising, in contrast to warranties and service commitments, which set out what the supplier agrees to provide as part of the service.
- Common disclaimers: in SaaS contracts, suppliers will want to include disclaimers that the services will not be uninterrupted or error-free, meet every customer requirement, or guarantee a particular business outcome.
- AI disclaimers: while disclaimers included in ordinary SaaS contracts will be relevant, additional disclaimers will be needed for AI-enabled SaaS platforms.
- Effectiveness: disclaimers should be carefully drafted in light of the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015.
Introduction
Software as a Service providers (Suppliers) typically sell the same platform to many different businesses (Customers). Those Customers may operate across a range of industries, use the software for different purposes, and have varied internal processes.
For this reason, Suppliers cannot promise that their standard SaaS product will meet every Customer’s individual requirements. The SaaS contract is important for defining what each party agrees to do and, just as importantly, the limits of those obligations.
Suppliers will include disclaimers in the SaaS contract to define the boundaries of the services they provide and the risks they accept. However, disclaimers do not allow Suppliers to avoid responsibility for everything that might go wrong. This blog explains the purpose of disclaimers in SaaS contracts, provides some common examples, and considers the limits on their effectiveness.
What is a disclaimer in a SaaS contract?
Disclaimers are statements in a SaaS contract about what the Supplier is not promising as part of the service. They can be contrasted with warranties, which are contractual promises concerning what the Supplier does agree to provide. Disclaimers are commonly included alongside the Supplier’s obligations and warranties and should be read in light of the rest of the contract.
Disclaimers are not the only way Suppliers will seek to limit their risk in a SaaS contract. Beyond disclaimers, Suppliers will often exclude liability for any loss of profits, loss of business, and indirect or consequential losses suffered by the Customer. Where the Supplier has breached the contract, their liability may also be capped at a particular amount, often tied to fees paid in the preceding 12 months.
Common disclaimers in Saas contracts
The disclaimers included will depend on the nature of the SaaS platform, its intended use, and the warranties given elsewhere in the agreement. The examples below are disclaimers that are commonly included in SaaS contracts. They often start with the wording “The Supplier does not warrant that” or “The Customer acknowledges and agrees”.
The Supplier does not warrant that the Customer’s use of the Services will be uninterrupted or error-free
Even well-maintained software hosted by a reliable cloud service provider may experience bugs or unexpected availability issues. Suppliers should therefore be reluctant to give an absolute promise that their platform will always be available or completely free from defects. This disclaimer makes clear that the Customer’s use of the software will not necessarily be uninterrupted or error-free.
This disclaimer should be considered alongside any service level agreements (SLA) and/or uptime guarantees given by the Supplier. If the Supplier has agreed to an availability or uptime target, it will remain responsible for meeting that target despite the disclaimer, subject to the qualifications contained in the SLA or guarantee itself (which may in turn include disclaimers, such as a disclaimer of liability for faults caused by the Customer).
The Supplier does not warrant that the Services, Documentation and/or the information obtained by the Customer through the Services will meet the Customer’s requirements
SaaS platforms may be supplied to Customers with different businesses, processes, and intended uses. The Supplier cannot anticipate every Customer’s individual requirements (which it may not know about) or guarantee that the software and the information produced through it will be suitable for every purpose. This disclaimer can assist in preventing a claim that the SaaS platform failed to perform because it didn’t do everything that the Customer wanted it to beyond what has been expressly or in some cases impliedly described by the Supplier.
The Supplier does not warrant that the Services will achieve a particular business outcome
Customers purchase SaaS products for a reason, whether that is to increase revenue, reduce costs, or improve productivity. However, achieving those objectives will usually depend on factors outside of the Supplier’s control, including wider market conditions and how effectively the Customer and its employees implement the software.
The Supplier may therefore disclaim that the services will achieve any particular commercial or operational outcome, although this will not relieve the Supplier of its obligation to provide the functionality or meet agreed deliverables.
The Supplier does not warrant that the Services will ensure the Customer’s compliance with applicable laws or regulations
Some Saas products are designed to help Customers manage their compliance with legislation, regulatory requirements, or industry standards. However, whether the Customer is ultimately compliant will not depend solely on the software, and will depend on how it is used, the information entered into it, and the Customer’s wider compliance framework. The Supplier will therefore disclaim that using the services will guarantee the Customer’s compliance.
The Customer acknowledges and agrees that the Services do not constitute professional advice
Similarly, SaaS platforms can provide information or tools that support legal, medical, financial, tax, or other professional matters. In this situation, the Supplier will want to disclaim that the services, or any output generated by the software, amount to professional advice.
The Customer acknowledges and agrees that the Supplier is not responsible for the accuracy or completeness of results produced from Customer Data
The outputs of a SaaS platform depend heavily on the data the Customer puts in. Even a well-built product is only as good as its inputs, so Suppliers typically disclaim responsibility for inaccurate or incomplete results that stem from issues with Customer data. The Supplier will remain responsible for errors caused by its own software, subject to the other disclaimers and warranties elsewhere in the contract. This disclaimer simply confirms that errors traceable to the Customer’s own data are the Customer’s risk.
The Supplier does not warrant the availability, accuracy or performance of third-party integrations
Many SaaS platforms depend on third-party hosting providers, application programming interfaces (APIs), and integrations with other platforms. As the Supplier cannot control these external factors, they will typically disclaim responsibility for those third-party aspects of the service.
“As is” wording in SaaS contracts
Some SaaS contracts state that the software is provided “as is” and without any warranty, express or implied, that is not provided for in the agreement. This clause seeks to exclude terms that might otherwise by implied by statute, such as the software being fit for a particular purpose. It also seeks to establish that the Customer accepts the software in its existing form and cannot claim that it was meant to provide qualities or functionality that aren’t listed in the contract. It is often paired with an entire agreement clause, which seeks to exclude promises made before the contract was signed.
These clauses are broader than the disclaimers discussed above. Rather than limiting elements one by one, they seek to exclude any promise or implied term that isn’t written into the contract. Aquila WSA Aviation Opportunities II Ltd v Onir Air Tasimacilik [2018] EWHC 519 (Comm) concerned “as is” wording in the context of an aircraft engine lease. The lessor was able to rely on the disclaimer in part due to its presentation in the contract, which included it being capitalised, bold, italicised, and even underlined in some places.
Although the case did not involve software, it illustrates that “as is” disclaimers can be effective in allocating risk in a SaaS contract. Suppliers should ensure they are brought to the Customer’s attention using a clear heading, bold or capitalised text, and a prominent position in the contract. Regardless of their placement, the drafting must be sufficiently precise to disclaim the particular liability. While they may prevent the Customer from asserting obligations that were not expressly agreed, “as is” will not override the Supplier’s promises elsewhere in the contract.
Disclaimers in AI-enabled SaaS contracts
The disclaimers used for AI-enabled SaaS platforms will often be similar to those used in conventional SaaS. For example, a Supplier will still disclaim that the software will operate without interruption, meet all of the Customer’s requirements, or produce a particular business outcome.
However, AI systems may produce unexpected or incorrect outputs even where the underlying software is operating as intended. Suppliers of AI-enabled SaaS products may therefore require additional disclaimers addressing those risks. Please see an example below.
The Customer understands that AI-generated outputs may not be accurate or complete and must be independently reviewed
An AI system may produce outputs that are inaccurate, incomplete, misleading, or based on fabricated sources. This disclaimer makes clear that the Customer should not rely solely on the outputs of the AI-enabled platform, ensuring that they are reviewed before use in the Customer’s business. This reduces the Supplier’s exposure to claims arising from the Customer’s reliance on those outputs.
Further examples and discussion can be found in our article on AI Disclaimers in Contracts.
Limitations on disclaimers in SaaS contracts
While disclaimers are key in defining the boundaries of the service the Supplier agrees to provide, including them in the contract does not guarantee that they will protect the buyer in every situation.
To start with, whether a Supplier can benefit from a disclaimer to avoid liability will depend on its wording, and the disclaimer must be interpreted in light of the contract as a whole. As discussed above, a general disclaimer will not be sufficient to protect the Supplier if it has agreed to a more specific obligation elsewhere in the agreement.
Reasonableness and disclaimers in B2B SaaS Contracts
A disclaimer is not automatically effective simply because it is included in the contract, and its effectiveness in B2B SaaS contracts may be limited by the Unfair Contract Terms Act 1977 (UCTA).
Under section 3 of UCTA, where the Customer contracts on the Supplier’s standard written terms of business, the Supplier cannot exclude or restrict liability for its own breach unless the term satisfies the requirement of reasonableness. The same restriction applies where the Supplier claims the right to provide a substantially different service or not perform the contract at all.
Section 11 UCTA states that a term is reasonable if it was fair and reasonable to include it having regard to the circumstances known, or which ought reasonably to have been known or contemplated, when the contract was made. The burden of establishing reasonableness rests with the party seeking to rely on the term, which will be the Supplier in the context of disclaimers.
Relevant considerations when assessing reasonableness include:
- the parties’ relative bargaining positions,
- whether the Customer received an inducement to agree to the term,
- whether the Customer had the opportunity to enter into a similar contract with an alternative supplier without that term being included, and
- whether the Customer knew or ought reasonably to have known about the term, having regard to trade customs and previous dealings between the parties.
However, Customers should not assume that the courts will set aside terms broad disclaimers that protect the Supplier. In Watford Electronics Limited v Sanderson CFL Limited [2001] EWCA Civ 317, the Court of Appeal emphasised that businesses of equal bargaining power are best placed to decide on the commercial fairness of their agreement.
A similar approach was demonstrated in Regus (UK) Ltd v Epcot Solutions Ltd [2008] EWCA Civ 361. The Supplier could rely on the clauses in the contract where the directors of the Customer were experienced businesspeople, the Customer used similar wording in its own contracts, and because the Customer had not sought to negotiate the part of the agreement it now claimed was unreasonable.
While these cases did not involve disclaimers, the same principles may apply where a disclaimer operates to restrict the Supplier’s liability. Not all disclaimers will operate in this way. A disclaimer can also operate to prevent a Supplier from being in breach of the contract at all. Carefully drafted allocations of risk are more likely to be upheld as reasonable than sweeping disclaimers where the Supplier seeks to avoid all responsibility for the SaaS platform’s performance.
Unfairness and disclaimers in B2C SaaS contracts
Consumers receive stronger protections than businesses under the Consumer Rights Act 2015 (CRA). Section 47 of the CRA prevents Suppliers from excluding or restricting their liability for statutory obligations that software is of satisfactory quality, fit for a particular purpose, and as described.
Section 62 also sets out that unfair terms are not binding on the consumer. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights to the detriment of the consumer.
Therefore, disclaimers in B2C SaaS contracts should be narrowly drafted to genuinely explain the product’s boundaries rather than seeking to remove liability for breaching statutory rights that the Supplier cannot exclude or restrict.
Conclusion
SaaS contracts will include a variety of disclaimers to help Suppliers set realistic expectations about their platforms and define the risks they have not agreed to accept. However, disclaimers do not allow Suppliers to avoid responsibility for every problem that might arise. Their effectiveness will depend on their precise wording, the obligations accepted elsewhere in the agreement, and, where applicable, the reasonableness and fairness requirements imposed by UCTA and the CRA. Suppliers should ensure that disclaimers are carefully tailored to the services they provide, while Customers should review them closely alongside any product documentation they are provided with to understand what the Supplier does, and does not, promise to deliver as part of the services.
How EM Law can help
EM Law are experts in SaaS contracts. We help Suppliers draft SaaS contracts tailored to the services they provide, including appropriate disclaimers to allocate risk between the parties. We also review SaaS agreements for Customers prior to signature, helping them to understand the practical effects of disclaimers. Finally, we can advise both parties about whether a disclaimer is effective in restricting a Supplier’s liability if the Customer is unhappy with the services.
Please visit our Software & Tech Lawyers, Contract Lawyers, AI Lawyers, and Dispute Resolution Solicitors pages for further information or get in contact with us here.
