Can I Completely Exclude Liability in My SaaS Agreement in Australia?

You cannot completely exclude liability in an Australian SaaS agreement, and an attempt to do so is likely to be void. The Australian Consumer Law sets guarantees that cannot be excluded, and the unfair contract terms regime adds a second limit on what a standard form agreement can do.

This page explains what cannot be excluded, what s 64A lets you limit, and how to draft limits that are more likely to be enforceable.

What cannot be excluded

Under the Australian Consumer Law, a term that purports to exclude, restrict or modify the consumer guarantees is void (s 64). That means a clause that says you are not liable for any loss whatsoever will be struck out to the extent it tries to exclude those guarantees.

Consumer guarantees apply to services acquired by a consumer, which includes a business buying services costing up to $100,000, or services of a kind ordinarily acquired for personal, domestic or household use. A small accounting firm that buys a SaaS subscription for $30,000 a year is therefore a consumer for the purposes of the guarantees, even though it is a business.

Liability for misleading or deceptive conduct (s 18) cannot be contracted out of. A clause that attempts to exclude liability for representations made in the sales process will not protect you if the conduct is found to be misleading.

The unfair contract terms regime applies to standard form small business contracts and consumer contracts. Since 9 November 2023 unfair terms are prohibited and penalties apply. A broad one-sided exclusion clause in a standard form SaaS agreement is at risk because it is likely to be seen as unfair in that context.

Quick checklist before you publish

• Does the clause try to exclude the guarantees? If it says it excludes, restricts or modifies the consumer guarantees, it is void (s 64). Replace it with a limit that is permitted.
• Is the customer a consumer? Check whether the services are acquired by a business as a consumer, including the $100,000 threshold and the personal use test.
• Is the s 64A limit available? For services not of a kind ordinarily acquired for personal use, you may limit to resupply or cost of resupply if fair and reasonable.
• Have you left s 18 in place? Do not attempt to contract out of misleading or deceptive conduct.
• Is the term in a standard form small business or consumer contract? If so, check it against the unfair contract terms regime, which since 9 November 2023 makes unfair terms prohibited and subject to penalties.

What you can limit and how to draft it

For goods or services not of a kind ordinarily acquired for personal, domestic or household use, a supplier may limit liability for breach of a guarantee to resupplying the services or paying the cost of resupply, if that is fair and reasonable (s 64A). That limit is not automatic. It must be included in the agreement and it must be fair and reasonable in the circumstances.

Common lawful tools that reduce exposure without trying to exclude everything are.

• Liability cap: a cap linked to fees paid in the prior 12 months, with a clear statement of what is included and what is carved out.
• Consequential loss exclusion: an exclusion of indirect and consequential loss that is defined carefully, not as a blanket “any loss”.
• Service level credits: credits as a remedy for downtime, with a process and limits that match the service levels.
• Carve-outs: the cap does not apply to data breach caused by the supplier, IP infringement, confidentiality breaches or other agreed matters.
• Mutuality: limits that apply both ways are more likely to be seen as fair than one-sided exclusions.

Example

A Brisbane SaaS startup’s standard terms say it is not liable for any loss whatsoever. A small accounting firm customer loses a week of data after an update. The exclusion will be void to the extent it tries to exclude the consumer guarantees, and the unfair contract terms regime may also apply because the terms are standard form. A more enforceable approach would be a cap at fees paid in the prior 12 months, a defined exclusion of indirect and consequential loss, service level credits for downtime, and carve-outs for data breach and confidentiality, with the s 64A limit included where it is available and fair and reasonable.

Quick check before you rely on a register

• Is it a legal register? If the service is a private website that charges a fee to store a file, it is not a legal register and does not create rights.
• Do you need evidence for court? Keep dated drafts and assignments; they are the evidence that matters in Australia.
• Do you plan to enforce overseas? Check US registration early if the US market matters, and check IP Australia for trade marks, designs and patents.

Keeping your records accessible

Store the evidence and agreements where they can be found quickly. A single project folder with dated files, signed assignments and the current licence or terms will save time when you need to answer a claim, an investor question or a due diligence request.

Keep these records for at least as long as the work is in use, and ensure they are accessible to the person who will answer a claim or an investor query.

See Also

• Queensland startup legal guide
• SaaS service agreements
• Software development agreements
• eCommerce terms and conditions

This page provides general legal information only; it is not personal legal advice. Everyone’s situation is different, so please seek independent legal advice for your own circumstances.