Contract data, stats, and expert opinions
Picture this: you’ve booked a meeting with a prospect, pitched your product, heard an emphatic “yes”, and sent your contract out for signature. All is well until your would-be customer comes back with a bunch of requested changes to your contract. You want to move forward, but you’re unsure. What’s typical, or market, in a SaaS agreement, anyway?
To help answer this question, we’ve put together an expansion and refresh of our Contract Benchmark Report. The Benchmark Report contains insights about the most common terms in SaaS commercial agreements, designed to help you make better decisions and get your contracts signed faster.
We built the report with data from the contracts of more than 1,000 companies using the Common Paper platform. We coupled this data with the experience of the Common Paper Committee, which is made up of over 45 attorneys from large enterprises, startups, Big Law firms, and boutique specialists. This is the second edition – you can find our 2022 report here. We’ve also created a one-page reference doc with some of the most valuable metrics from this year’s report – you can download it here.
The report dives into the Cloud Service Agreement (CSA), Design Partner Agreement, and Mutual NDA, to help arm you with data about the most common terms found in each of these agreements. Additionally, we’ve published insights below about how customers negotiate and sign contracts, and how that changes with company size.
Note that the CSA is analogous to what’s sometimes referred to as an MSA or “Master Services Agreement.” Regardless of the name, we’re talking about contracts covering the sale and use of a B2B SaaS or cloud product.
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Negotiation and counterparty dynamics
Most B2B negotiations are, by their nature, private affairs. There isn’t much public, evidence-based information about how contracts are negotiated and by whom. Some of the most common questions we get from Common Paper customers are about these topics, so we’re using our unique dataset to get some answers.
Customer roles and titles
Many people might be involved in the decision to buy, but there’s typically only one signature on the dotted line. Almost three-quarters of the time, it’s an executive. Here are the levels of the signers on the customer side of Cloud Service Agreements:
| 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
A tidal wave of AI products hit the market in the past year and software buyers are taking notice. Whether you’re selling AI-enabled products or training models yourself, you’ll need to be prepared to navigate questions like “Do you use customer data for training?”
Clauses covering the use of customer data for AI and ML models are becoming more common. In Q1 2023, less than 5% of CSAs mentioned AI. By Q4 2023, this number was 25%.
Time to sign by customer size
Enterprise procurement cycles are notoriously long, but does that hold specifically for contract negotiation? Common Paper manages the entire contract workflow, which normally happens across emails, redlines, and e-signature tools. So we have a view of the complete picture.
While some enterprise contracts do take a very long time, the median contract with an enterprise only took 40% longer than the median for SMB. This is a lot faster than we expected!
| 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
Knowing which contract terms are most likely to be negotiated by your counterparty can put you ahead of the curve. Here are the most commonly negotiated terms in Cloud Service Agreements:
- Fee amount and structure – the pricing details of the contract.
- Auto-renewal/nonrenewal notice – whether or not the contract renews automatically.
- Invoice period – whether the customer pays monthly, annually, etc.
Sales agreements aren’t the only contracts that get negotiated. Here are the most commonly negotiated terms in NDAs:
- Term of confidentiality – how long the parties are subject to confidentiality obligations.
- NDA term – the length of time for which the contract is valid.
- Chosen courts – where a lawsuit related to a contract can be filed in the event of a dispute.
Insurance requirements by company size
During the sales process, larger customers often focus on mitigating risk. As part of that, some customers require vendors to carry insurance for things like Errors and Omissions or Cybersecurity.
This gets dramatically more common upmarket, and CSAs with Enterprise customers are more than 4X as likely to include insurance minimums than SMBs.
| Customer Size | % of CSAs w/ Insurance Minimums |
| SMB | 6.5% |
| Mid-market | 11.5% |
| Enterprise | 28.6% |
Cloud Service Agreement
A Cloud Service Agreement is a contract used to sell cloud services or SaaS in a vendor-customer relationship. The CSA includes the business terms of the sale, like the product and fees, as well as the legal terms that govern the relationship between the vendor and the customer.
Here’s a look into a few key insights behind negotiating CSAs as well as the most common choices agreed upon by Common Paper users and their customers.
Subscription details
The subscription period is the length of the contract being signed. 70% of CSAs are annual, while 19% are monthly.
90% of CSAs have automatic renewal, and 29% include an automatic fee increase upon renewal (most commonly 5-8%).
In 84% of auto-renewed contracts, customers agree to a 30-day non-renewal notice period, which is the date before which customers must let the vendor know if they are churning.
Payments
The payment period defines how long a customer has to pay the vendor. You might also hear this called Net 30 (a 30-day payment period), Net 60, etc. Larger companies with more complex finance processes often require longer payment periods to account for internal processing, and they also want to get the cash flow benefit of paying later. Smaller companies have less leverage and tend to be more agile, often accepting shorter payment periods.
“30 days from customer’s receipt of invoice” is the most common payment period, accounting for 62% of signed CSAs.
The invoice period is how frequently a vendor bills the customer. 48% of CSAs use monthly invoices, while 46% send annual invoices. Quarterly invoicing is relatively rare, making up only 5% of CSAs.
Dispute resolution
Disputes over sales contracts like the CSA are handled through the courts or binding arbitration. Arbitration is a private process where a person or a group of people called arbitrators listen to both sides of a dispute and make a decision. It’s less formal, usually faster, and can be cheaper than going to court.
The other option, of course, is going to court. Governing law refers to which laws a court will apply to resolve a dispute about the contract, while chosen courts represent where a lawsuit related to the contract can be filed. The concept of chosen courts is also called jurisdiction or venue. These terms are also present in many other types of contracts, including the NDA and Design partner agreement discussed below.
CSAs usually use the same state for both governing law and chosen courts. For both, roughly 71% use Delaware, and the next most common state is California.
One consistent theme across agreement types is the popularity of Delaware as an option for governing law and chosen courts. This likely reflects Delaware’s reputation as a business-friendly state with an efficient court system (Delaware Court of Chancery).
The general cap amount, or limitation of liability, describes the maximum amount of damages a vendor or customer can receive as the result of a lawsuit, outside of specially designated categories. 85% of CSAs use a cap equal to the fees paid or payable by the customer in one year under the contract.
Increased and unlimited claims deal with breaches of certain contract terms that can result in damages for more than the general cap. Typically, these might be related to privacy, security, confidentiality, gross negligence, or willful misconduct. Only 13% of CSAs include increased claims, while unlimited claims are even more rare at about 1%.
Risk mitigation
Also known as indemnity, covered claims are a contractual promise by one company to pay for certain kinds of losses experienced by the other company that result from a lawsuit by a third party. When drafting the CSA, the Common Paper Committee decided to include the following covered claims for providers and customers as the default:
- The provider will pay for the customer’s losses caused by a lawsuit about the product violating a third party’s intellectual property rights.
- The customer will pay for the provider’s losses caused by:
- A lawsuit about the content they upload to the product violating a third party’s intellectual property rights.
- A lawsuit about the customer breaching the restrictions of using the product, such as using it for an illegal purpose.
76% of CSAs included these default positions on covered claims.
Insurance minimums are a commitment to hold corporate insurance, often requested by customers as a way to mitigate risk, present in 9% of signed Common Paper CSAs. Of those:
- 100% include commercial general liability insurance
- 87% include errors and omissions insurance
- 78% include cyber insurance
Add-ons
A service level agreement or SLA defines the level of service expected from a vendor, lays out the metrics by which service is measured, and the penalties if agreed-on service levels are not achieved. SLAs are fairly common in SaaS agreements: 39% of CSAs include one.
Including a security policy isn’t always necessary for early-stage companies, as they become more common when companies start to scale or sell into larger enterprises. 37% of CSAs include a security policy. It’s likely that some of the companies without a security policy in their contract separately provide security policies to customers.
Publicity rights give a vendor the right to talk about a company as a customer. This could be limited to certain types of publicity (like reference calls) or more wide-ranging (like featuring a customer’s logo on the vendor’s website). 45% of signed CSAs include some form of publicity rights.
Beyond the benchmark data
We often hear questions from founders about terms that don’t appear in Common Paper agreements, or about why certain terms were set the way they are. Here’s the committee’s point of view on a few of these terms:
AI training
With the rapid growth in AI, we’re hearing more questions from founders about how to handle data and customer content in their contracts. In consultation with the committee, we’ve added sample language for training AI and machine learning models to our language library. While the landscape surrounding AI products is still evolving quickly, we expect that founders building with AI will deal with an increasing number of questions from customers for the foreseeable future.
Representations and warranties
The CSA Standard Terms include a few baseline representations and warranties from both vendor and customer. These include being a properly organized and registered company and complying with applicable laws. In addition, vendors make baseline warranties about their products or services, and customers make a baseline warranty about any content they upload to a product. These reflect what the committee felt was most common for a cloud service or SaaS sale. Although the CSA can accommodate additional warranties, this is very rarely used.
Termination for convenience
The right to terminate for convenience allows one or both parties to terminate a contract at any time for any reason or no reason at all. The committee agreed that the CSA Standard Terms shouldn’t include a right to terminate for convenience. Although some companies request this, excluding termination for convenience helps customers preserve access to a product or service and vendors simplify revenue processes. For the times when this is a “must have”, the language library includes a termination for convenience clause to add to your CSA.
Creating your company’s sales agreement shouldn’t be time-consuming and expensive. Sign up for Common Paper for free to build, send, and sign a CSA in minutes.
Mutual NDA
A mutual non-disclosure agreement allows for the exchange of confidential information between two parties. In the case of SaaS companies, NDAs are often signed early on in the conversations between a vendor and prospective customer or between potential partners. They might be needed to share security information, a SOC 2 audit report, or a product roadmap.
The most commonly varying terms in NDAs have to do with locations and lengths of time.
Location
Two concepts use location in an NDA: governing law and chosen courts (also known as jurisdiction).
Each state (or province, country, etc.) has different laws. Setting the governing law clarifies the set of laws under which the contract will be interpreted. Chosen courts specify where a lawsuit related to the contract can be filed in the event of a dispute.
Since Common Paper users started signing NDAs in September 2021, about 97% of NDAs have included the same state for both governing law and chosen courts. The most commonly chosen states are:
- Governing law:
- Delaware: 63%
- California: 16%
- New York: 10%
- Chosen courts:
- Delaware: 64%
- California: 16%
- New York: 9%
Time
There are two terms related to time in a Common Paper NDA: NDA term (also known as agreement term) and term of confidentiality. In both cases, parties can choose whether to use fixed-length expiration or keep the terms perpetual. For a perpetual NDA term, the default is that either party can terminate the NDA by giving the appropriate notice.
NDA term is the length of time for which the contract is valid. Practically, this is the period for sharing confidential information under the NDA. Of the NDAs with fixed length expiration, the most common NDA term lengths are:
- 1-year: 74%
- 2-years: 15%
- 3-years: 5%
About 36% of NDAs have no fixed expiration but may be terminated at any time.
Term of confidentiality refers to how long the parties are subject to confidentiality obligations and must protect confidential information.
Overall, nearly three-quarters (74%) of Common Paper NDAs have a fixed length term of confidentiality, while 26% are unlimited, meaning that confidential information exchanged under the NDA should stay confidential indefinitely.
The most common term of confidentiality for Common Paper NDAs is two years, comprising 56% of NDAs.
Beyond the benchmark data
We often hear questions from founders about terms that don’t appear in Common Paper agreements, or about why certain terms were set the way they are. Here’s the Common Paper Committee’s point of view on a few of these terms:
Residuals
Residuals in NDAs can be a contentious topic, and here’s why. NDAs are about safely sharing confidential information. The agreement typically prevents each party from using the information shared by the other for other purposes. A residuals clause is an exception, which allows one or both parties to use information they happen to remember, despite the restrictions in the NDA that would otherwise prevent them from using that information.
After much discussion, the Common Paper Committee decided to omit the concept of residuals from the standard terms. Although some large companies and most VCs insist on having them, the committee agreed they are not common for day-to-day NDAs for B2B SaaS companies. If you’re working on an NDA and an investor insists on including a residuals clause, the language library includes a clause that allows a potential investor to use residual information.
Conversely, the Common Paper NDA Standard Terms allow companies to keep confidential information in record retention and backup systems. This reflects a consensus among the committee about the reality modern companies face when they must return or destroy confidential information while also maintaining necessary system redundancies.
Getting an NDA in place should be quick and easy – that’s where Common Paper comes in. Sign up for free to build, send, and sign your first NDA in just a few minutes.
Design Partner Agreement
Design partners are often the first users of a startup’s product, working closely with the startup to provide critical feedback in exchange for early access and favorable (or free) pricing. Unlike a non-binding letter of intent or a handshake, a Design Partner Agreement helps founders create buy-in and clarify expectations while protecting the company’s intellectual property.
Here’s a look into the terms of the Common Paper Design Partner Agreement and the most common choices agreed upon by Common Paper users and their design partners.
Partner and provider obligations
Design partnerships are a two-way street. Partner obligations are the requirements that design partners agree to, like providing feedback or agreeing to serve as a reference.
72% of design partner agreements include regular feedback participation. Of these, the most common schedules for feedback participation are:
- Twice monthly: 46%
- Once monthly: 36%
Another common form of partner obligation is appearing in a vendor’s customer lists. 64% of design partner agreements allow the design partner to appear in a vendor’s private customer list, while 61% allow the design partner to be listed publicly.
More involved commitments from a design partner are less common, but still make up a significant portion of the agreements signed in Common Paper. 45% of agreements include a case study, while 42% specify the design partner to serve as a reference for the provider.
Provider obligations are exactly what they sound like, and are the complement to the partner obligations. Discounts on a future long-term subscription are the most common obligation, featuring in 43% of agreements. The most common discounts are:
| Discount Percentage | % of Design Partner Agreements with Discount |
| 50 percent | 40% |
| 20 percent | 21% |
| 30 percent | 14% |
One question that often comes up for founders when selling to a new design partner is whether they should include a promise to build specific functionality in the contract. Among Common Paper users, this appears in only 17% of design partner agreements.
Fees and term length
Another key question for founders is whether they should charge during the design partnership. 25% of agreements include fees as part of the design partner program.
Compared to sales contracts like the CSA, design partner agreements often have a shorter duration, or term length, giving founders and their design partners a defined window to decide whether they want to move forward with a full-scale sales agreement:
- 3 months: 27%
- 6 months: 22%
- 1 year: 19%
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