When is a Software Licensing or SaaS Deal Done?

Short answer: a software or SaaS deal is not done until there is a signed written agreement. Business people often treat an oral or email “yes” as the close. Protect yourself by stating clearly, in writing, that nothing binds until both sides sign a definitive contract.

There is too often a gap between when business people and lawyers think a software licensing or SaaS deal is done. Some salespeople believe the deal closes once they orally agree on the important terms. Lawyers know a deal is not done until a written contract is signed. That gap is where expensive surprises live.

Why This Matters to a Software or SaaS Company.

An email thread can be read, after the fact, as a binding contract. A New York case decided in September 2009 makes the point. The parties exchanged many emails discussing an exclusive license to the copyright in a hot movie. The plaintiff then wrote that the deal was done. The defendant said it would get back to them. The court correctly held there was no contract and dismissed the case, but only after the defendant had to litigate the question. An aggressive counterparty will treat your friendly “sounds good” as acceptance, so the words your team types during a negotiation carry real legal weight. Under basic offer and acceptance principles, a contract forms when there is a clear offer, acceptance, and consideration, and courts will look at emails and conduct to decide whether that happened.

What to Do When Someone Says “We Have a Deal.”

If a counterparty takes the position, in an email or a call, that an important deal is done, or tries to confirm the terms of something discussed orally, respond immediately and in writing that:

• The deal is not done. Nothing is agreed yet.
• Any deal must be in a final written agreement signed by both parties. Until then, neither side is bound.

Silence is the trap. If you let an aggressive “the deal is done” email sit unanswered, you hand the other side an argument that you accepted by acquiescence.

Build the Protection Into Your Deal Process.

Two cheap habits prevent most of these fights. First, put a line in your proposals, term sheets, and important emails stating that discussions are non-binding and that no agreement exists until a definitive written contract is signed by both parties. The statute of frauds already requires a signed writing for some agreements, but do not rely on it; say it expressly. Second, train sales and executives that “we have a deal” on a call is a starting point, not a contract, and that they should avoid writing “we’re agreed” or “the deal is done” unless they actually intend to bind the company. This is the same discipline behind deciding whether something belongs in a contract or a policy, and behind making sure your clickwrap acceptance is actually enforceable. It also pairs with knowing how informal messages can change a written contract.

Frequently Asked Questions.

Can an email exchange create a binding software deal? It can. If the emails show a clear offer and acceptance of definite terms, a court may find a contract, which is why you should state in writing that nothing binds until a signed agreement.

What single sentence protects me? A non-binding clause: “These discussions are non-binding, and no agreement exists until a definitive written contract is signed by both parties.” Put it in proposals and key emails.

Is an oral “yes” ever enough? Sometimes, depending on the deal and the state, but you never want to be in that fight. Require a signed writing so the answer is always clear.

Protect your gold, and be wary of aggressive emails claiming a deal is done. I hope this helps.

For the broader playbook on managing customer expectations across the deal, see Contract or Policy? When Software Companies Should Use Each.

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.