Early termination of a SaaS agreement: what rules apply
Monthly, annual commitments, exit clauses, penalties and Data Act: everything you need to know to manage early termination of a SaaS contract.
.avif)
If you are a SaaS customer and wish to terminate your agreement early, you now have an additional option through the termination right introduced by the Data Act. I invite you to read my full article on this topic and visit my dedicated page.
Can a customer end their SaaS agreement before its expiration date? It all depends on the conditions stipulated in the SaaS agreement. Good drafting of termination clauses makes it possible to avoid disputes and for the SaaS vendor to secure revenues. Poor management of early termination can lead to financial losses, disputes, or a negative impact on customer relationships. Here are the main scenarios, their implications, and best practices for dealing with them.
If your SaaS contract is for an indefinite period with monthly renewal, the customer can generally cancel at any time, subject to notice. This period is often set at 30 days, but it may vary depending on contractual conditions.
Key point: No compensation may be required unless a specific clause provides for it. However, it is possible to frame the termination with a mandatory written notification or a final non-reducible billing period to avoid sudden departures that could impact revenue planning.
In this case, the customer is required to respect their commitment until the end of the contract. Even if they cease to use the service, they remain liable for all amounts due.
Key point: Early termination is not possible except in the event of fault by the provider or force majeure. It is crucial to specify in the contract what constitutes a "fault" and how termination can be implemented in the event of a contractual breach.
Some contracts allow early termination for convenience. If this option is included, it is usually accompanied by several conditions:
Key point: A well-drafted clause protects the vendor against a sudden loss of revenue while offering structured flexibility to the customer. Some contracts may also provide for an alternative to termination, such as an adjustment of the scope of services or a downgrade to a lower tier rather than a complete exit.
Beyond these immediate consequences, two points are often overlooked.
The first concerns the fate of data after termination. The contract must specify how long the vendor retains the customer's data after the end of the service, in what format it can be returned, and from what date it will be deleted. Without this clarity, the customer risks losing operational data, and the vendor is exposed to a potential GDPR breach.
The second concerns third-party integrations. If the SaaS is connected to other tools (CRM, ERP, partner APIs), termination can trigger a chain of disruptions. It is useful to provide for a technical transition period, even a short one, to allow the customer to reconfigure their environment.
Since 12 September 2025, the Data Act has introduced a specific exit right for customers of SaaS and cloud services who wish to switch provider or bring the service in-house.
This right is distinct from standard early termination: it does not depend on the contractual clauses and applies even where there is a firm commitment period. The notice period cannot exceed two months, and switching charges are strictly regulated.
For vendors, this changes the equation: even a contract without an early termination clause no longer provides absolute protection if the customer invokes the Data Act. It is therefore essential to integrate this right into your contracts and anticipate its impact on your revenue model.
For more detail: Data Act and SaaS contract termination: what changes for vendors.
Early termination of a SaaS contract must be properly managed to limit risks and avoid disputes. Good contractual drafting protects your interests while ensuring a balanced relationship with your customers.
Anticipating these issues at the negotiation stage prevents you from having to manage conflictual exits. If you need an audit, an update of your SaaS contracts, or the drafting of an early termination clause tailored to your business, I can assist you.
Yes. Even without an early termination clause, a serious breach by the vendor — prolonged unavailability, failure to meet service level commitments (SLA), GDPR violation — can justify termination at the vendor's fault. However, it is generally necessary to first send a formal written notice to the vendor, giving them a reasonable period to remedy the breach.
Where termination is attributable to the vendor's fault, the contractual early termination fee is generally not owed. It is the vendor's breach that justifies the exit: the customer cannot be financially penalised for a termination caused by the other party.
Standard early termination depends entirely on the contractual clauses: if nothing is provided for, it is generally not possible. Data Act termination is a statutory right, of public policy, which applies regardless of the contract — but only in the context of switching provider or bringing the service in-house.
Why and how a lawyer can structure CLM deployment in startups, securing contracts, templates and playbooks without an in-house legal team.
Essential clauses in a software development contract: scope, deliverables, acceptance testing, IP ownership, payments, liability, and legal protection.
Let's build together to grow your business
I have been supporting software and SaaS companies for more than 10 years, to structure their business, protect their intellectual property and improve their contracts.
