SaaS Subscription Agreement Red Flags: Six Clauses Small Businesses Should Check
This page is general information, not legal advice.
When a small business signs up for software, it usually accepts the vendor's standard subscription agreement. These agreements are written by the vendor and usually favor the vendor. This page covers six clauses that often shift cost or risk onto you as the buyer. For each one you get an illustrative example, why it matters, and wording you could propose. The examples are generic and don't come from any real company's contract. Larger contracts can sometimes be negotiated. Self-serve plans usually can't, so in that case use this page as a checklist for deciding whether to sign.
1. Auto-renewal with a long cancellation window
A typical clause might read:
"This Agreement will automatically renew for successive periods equal to the initial term unless either party gives written notice of non-renewal at least 90 days before the end of the then-current term."
Why it works against you
The renewal itself is rarely the problem. The deadline is. If you have to give notice months before the term ends, it's easy to miss, and then you're locked into another full year. Check whether the vendor has to remind you, and whether notice must go to a specific address or in a specific format. See auto-renewal clauses explained.
What to ask for instead
Sample wording to propose: "Vendor will notify Customer in writing at least 30 days before the non-renewal deadline, stating the renewal date and price. Customer may give notice of non-renewal by email to Vendor's account contact."
2. Price increases at renewal
A typical clause might read:
"Vendor may change the fees for any renewal term by providing notice to Customer prior to the renewal date."
Why it works against you
This sets no limit on the increase and no minimum notice period. If the notice reaches you after your cancellation deadline has passed, you may have to pay the new price for another full term. Also check whether per-seat or usage-based fees can change partway through a term.
What to ask for instead
Sample wording to propose: "Fees for any renewal term will not increase by more than [agreed percentage] over the prior term. Vendor will give notice of any increase at least 30 days before Customer's non-renewal deadline."
3. Losing access to your data after termination
A typical clause might read:
"Upon termination or expiration, Customer's access to the Service will cease and Vendor may delete Customer Data without liability."
Why it works against you
Your records, customer lists, or files could disappear the day the contract ends. Some agreements don't let you export at all. Others only let you export in a format you can't easily use. This matters most when the vendor ends the contract or suspends your account. For how exits work more generally, see termination for convenience clauses explained.
What to ask for instead
Sample wording to propose: "For 30 days after termination or expiration, Customer may export all Customer Data in a standard, machine-readable format. Vendor will not delete Customer Data before the end of that period, except at Customer's written request."
4. Service credits as your only remedy
A typical clause might read:
"If the Service fails to meet the Availability Commitment, Customer's sole and exclusive remedy shall be the service credits described in the Service Level Agreement."
Why it works against you
An uptime promise sounds reassuring. But if credits are your only remedy, a long outage might get you a small discount on next month's bill and nothing more. Credits often have to be claimed within a short window, and they may be capped. Also look at what the vendor excludes from downtime, such as scheduled maintenance.
What to ask for instead
Sample wording to propose: "If availability falls below the Availability Commitment in any [number] months within a rolling 12-month period, Customer may terminate this Agreement and receive a prorated refund of prepaid fees for the remaining term."
5. A low liability cap and broad disclaimers
A typical clause might read:
"In no event shall Vendor's aggregate liability exceed the fees paid by Customer in the three months preceding the claim. Vendor shall not be liable for any loss of data, profits, or business interruption."
Why it works against you
A cap based on a few months of fees can be far less than what a data breach or lost records would actually cost you. Excluding data loss is especially risky when the product's whole job is to store your data. Check whether the cap applies to both parties equally and whether there are any carve-outs, for example for confidentiality breaches. See limitation of liability clauses explained.
What to ask for instead
Sample wording to propose: "The liability cap will not apply to Vendor's breach of its data security or confidentiality obligations, which will be subject to a separate cap of [agreed amount]."
6. One-sided indemnification
A typical clause might read:
"Customer shall defend, indemnify, and hold harmless Vendor from any claims arising out of Customer's use of the Service or Customer Data."
Why it works against you
"Arising out of Customer's use of the Service" can cover almost anything. Meanwhile the vendor may give you no protection at all, not even if a third party claims the software itself infringes their intellectual property. If you're a small business, the costs of defending a claim like that could be serious. See indemnification clauses explained.
What to ask for instead
Sample wording to propose: "Vendor will defend and indemnify Customer against third-party claims that the Service infringes any intellectual property right. Customer's indemnity is limited to claims caused by Customer Data or Customer's breach of this Agreement."
Also worth a look
Watch for clauses that let the vendor change the terms by updating a web page, where continuing to use the service counts as accepting the change. Also read any dispute clause that sends claims to private arbitration in a distant location. Compare mandatory arbitration clauses explained. Finally, check whether the vendor can suspend your account without notice for reasons it alone decides. A suspension can hurt as much as a termination.
Before you sign
- Check the cancellation deadline and add it to your calendar.
- Confirm that you can export your data, how, and in what format.
- Compare the liability cap to what a serious incident would actually cost you.
- Read every document the agreement links to (acceptable use policy, SLA, data processing terms), because they're part of what you're agreeing to.
How enforceable any of these clauses is depends on where you are, so for a high-value contract, talk to a qualified lawyer. This page is not legal advice.
Scan your own document free
Vendor agreements vary, and the version you're shown at checkout may not match the one you read last year. Paste your SaaS subscription agreement or Terms of Service into the ScanMyTerms Terms of Service checker. In about a minute it flags clauses that work against you, with the exact wording and what to ask for instead. The free preview shows the risk count and the first two findings, and the full report is a one-time $5 per document.
This page is general information, not legal advice.
Sources
- The clause examples on this page are illustrative and written for this guide. They don't quote any specific company's agreement. Reviewed 2026-10-29.