Data Act and SaaS contract termination: what is changing for SaaS companies and their customers

The Data Act has fundamentally changed how SaaS providers must handle contract termination, especially when a customer wants to switch to another provider. My objective with this article is twofold: to help SaaS vendors understand why they must update their contracts, and to make customers aware that they now have a real legal tool to exit a restrictive SaaS agreement.

A new, mandatory exit right under the Data Act

The Data Act applies to all “data processing services”: IaaS, PaaS, SaaS and similar cloud environments.
It creates a mandatory switching right that allows customers to:

• change cloud or SaaS provider, or
• migrate the service back to their internal infrastructure.

Practically, the provider must allow the customer to terminate the contract for the purpose of switching, with a notice period that cannot exceed two months.

This right applies even if:

• the contract includes a firm commitment period,
• the contract was signed before 12 September 2025.

In other words, the Data Act introduces a specific right of termination for provider switching, which limits the traditional contractual freedom SaaS vendors have relied on for years.

What SaaS vendors must do: update your contracts now

If you sell SaaS to customers located in the EEA, you cannot afford to ignore this new exit right.
Your contracts must be updated to:

• incorporate a specific Data Act switching termination right,
• clearly define the switching process (notice period, steps, data export formats, points of contact),
• set out your obligations during the transition (assistance, data transfer, continuity of service until the switch is completed).

I recommend including a dedicated clause, applicable only to EEA customers, that:

• restates the customer’s right to terminate in case of switching or internal migration,
• requires written notice with a reasonable period (e.g., 60 days) to organise the transition,
• requires the customer to cooperate and, when relevant, involve its future provider,
• specifies how you will assist with the transfer of data and until when the service will remain active.

This ensures compliance while maintaining operational control over the timeline and the workload generated by the migration.

Can SaaS contracts still include early termination penalties?

The Data Act distinguishes between two concepts:

1. Switching charges – costs directly related to the switching process (data egress, technical work, etc.).
2. Early termination penalties – financial consequences of ending the contract before the agreed term.

Switching charges are being phased out.
Until 12 January 2027, providers may only charge switching costs that are strictly necessary.
After that, they can no longer charge any switching fees at all.

However, the Data Act does not ban early termination penalties.

You may still contractually provide either:

• no penalty (a “free exit”), or
• a proportionate penalty (e.g., the remaining fees for the commitment period or a reduced percentage).

These penalties must remain reasonable and comply with national laws on unfair terms.

In practice, I recommend:

• explaining clearly—before signature—the financial consequences of a Data Act termination,
• distinguishing in the contract what is an early termination penalty and what is a switching-related cost,
• avoiding vague “technical costs” that could be reclassified as prohibited switching charges.

For SaaS customers: how to use your new termination right

If you are a SaaS customer, the Data Act gives you a concrete, enforceable mechanism to exit a contract that no longer fits your needs.

You can:

• request to switch to another provider or migrate the service internally,
• require that your data be exported in a structured, commonly used and machine-readable format,
• impose a notice period of no more than two months—even if the contract states otherwise.

In return, you must:

• follow the contractual procedure (written notice, information on the new provider, timetable),
• pay any legitimate early termination penalty that was clearly set out in the contract.

In practice, this right reduces the imbalance created by technical lock-in, migration complexity or business dependency.

What if the SaaS contract has not yet been updated?

Many SaaS contracts will not be updated in time.
This does not remove the customer’s rights.

The Data Act is directly applicable.

This means customers can:

• rely directly on the Regulation to terminate in the context of switching,
• demand data portability in a structured, common and machine-readable format,
• rely on the duty of good faith in contract performance.

For SaaS providers, outdated contracts create compliance risks and unnecessary disputes.
The best approach is to update your templates now, before customers start invoking the Data Act themselves.

How to draft a balanced “Data Act termination” clause

In the contracts I update for my clients, a compliant clause generally:

• identifies the customers covered (EEA entities only),
• sets out the notice requirements and the notification process,
• organises the transition period (duration, potential extensions, responsibilities of both parties),
• specifies the data export procedure and the timeframe during which the customer may retrieve its data after termination,
• includes a transparent and proportionate early termination penalty if the vendor needs to secure its business model.

The goal is not to undermine the Data Act but to integrate it intelligently so both parties understand the process and their obligations.

Conclusion

The Data Act reshapes SaaS termination rights by giving customers a real option to exit and by restricting SaaS vendors’ contractual freedom.

If you are a SaaS vendor, you must adapt your contracts to reflect this new switching right, clarify your assistance obligations and structure your early termination penalties.
If you are a SaaS customer, you now have a legal mechanism to leave a contract more easily and manage a smooth migration to another provider.

I assist both SaaS vendors and SaaS customers with:

• reviewing and updating SaaS contracts,
• drafting Data Act–compliant clauses,
• securing switching processes and migration obligations.

‍