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ProcurementContractsFree Checklist

SaaS Contract Red Flags Checklist

Nine clauses to review before you sign. Print this out and work through it before every SaaS contract above $10,000 a year.

Easy Entropy TeamUpdated July 20269 clauses

SaaS contracts are written to protect vendors. The monthly price often feels small enough to skip a careful read, until three years later it is a large annual commitment with a 90-day notice window and a price escalation clause that just triggered.

Work through these nine sections before you sign. Tick each box as you confirm the vendor's position in writing.

1

Notice Window for Cancellation

What is the required notice period to cancel or not renew?
Is it 30 days, 60 days, or 90+ days?
Does your renewal reminder system surface this date with enough lead time?
Is the notice requirement in writing (email sufficient, or certified mail)?

30-day notice. Flag anything over 60 days.

2

Automatic Price Escalation

Does the contract allow the vendor to raise price at renewal without negotiation?
What is the cap? (Watch for "up to X%", "CPI-linked", or no cap at all)
Have you modelled the escalation into your multi-year budget?
Did you push to fix pricing for the contract term, or cap increases at 3%?

Fixed pricing or a cap at 3%. Flag any uncapped escalation clause.

3

Evergreen Renewal Into a New Multi-Year Term

"successive terms of the same length" locks you into multi-year on auto-renew.

Does the auto-renewal renew for 1 year, or does it reset to the original term length?
If original term was 3 years, does a missed notice lock you in for 3 more years?
Is the renewal term explicitly stated in the auto-renewal clause?

Month-to-month or 1-year auto-renewal only.

4

Seat Ratchet / Minimum Commitment

"seat count cannot be reduced below prior term's licensed count."

Can you reduce the number of seats at renewal, or only add?
Is there a minimum seat floor that persists across all renewal terms?
What happens if actual usage drops, are you still billed for peak seat count?

Right to reduce seats to actual active users at each renewal.

5

Termination for Convenience

Can you exit the contract for any reason (convenience), or only for vendor breach?
Is there an early termination fee, and how is it calculated?
Does the contract include a wind-down period with reduced payment?
For multi-year deals: is there a convenience exit after Year 1?

T4C clause with 30 to 90 days notice and no penalty. Flag any contract with no exit path.

6

Data Deletion on Exit

How long after cancellation can you export your data?
What formats are available for export (CSV, JSON, API)?
When does the vendor permanently delete your data from their systems?
Is there a confirmed deletion certificate, or is this just implied?
For regulated industries: does the vendor's data retention comply with your obligations?

30-day export window, confirmed deletion within 90 days, export in a portable format.

7

Unilateral Terms Changes Mid-Term

Can the vendor change pricing or service terms during your contract term with just 30 days notice?
Does continued use constitute acceptance of new terms?
If the vendor makes material changes, do you have an explicit right to exit without penalty?

Pricing and material terms locked for the duration of each contract term.

8

Audit Rights and Usage Definitions

What exactly counts as a "user" or "seat" under this agreement?
Does the definition include API connections, service accounts, or integration users?
Can the vendor conduct a retroactive usage audit and bill for overages?
Is the audit right limited in frequency (e.g., once per year)?

Clear user definition in writing, audit frequency capped, no retroactive billing surprises.

9

Subprocessor Changes Without Notice

Does the Data Processing Agreement list current subprocessors?
Can the vendor add or replace subprocessors without notifying you?
If a new subprocessor creates compliance issues, do you have an exit right?
Is there a mechanism to object to specific subprocessors (required under GDPR)?

Advance notice of material subprocessor changes with an exit right if non-compliant.

Quick Decision Guide

If you find one of these clauses, here is the minimum action to take before signing.

If you findDo this
Notice window over 60 daysRequest reduction or add to renewal tracking immediately
Uncapped price escalationNegotiate a cap of 3% or fixed pricing
Auto-renews into multi-yearNegotiate renewal into 1-year term
No seat reduction rightNegotiate right to right-size at renewal
No termination for convenienceNon-starter on multi-year; escalate to legal
No data export window statedGet it in writing before signing
Mid-term price change rightAdd explicit exit right for material changes
Vague user definitionDefine in writing; get confirmation of your specific setup
Subprocessors can change silentlyAdd notice and objection right to DPA

Before You Sign

  • Contracts above $50,000 a year: Legal review is worth the cost. Share this checklist with counsel.
  • Contracts $10,000 to $50,000 a year: Use this checklist yourself. Document vendor responses in writing during procurement.
  • Contracts under $10,000 a year: At minimum, confirm items 1, 3, and 5 before signing.

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