Indemnity caps are where most SaaS negotiations slow down. The vendor wants one number for everything. The customer wants the claims it cannot control left out of that number.
Where caps land today
Across the agreements our customers reviewed this year, most general caps sat at twelve months of fees. The difference was in the carve-outs: IP infringement was uncapped in most deals, and data breach claims usually got a separate, higher cap.
What to give up first
If you have to move, move on the general cap before the carve-outs. A lower general cap with an uncapped IP indemnity protects you better than a higher cap that covers everything.
Keep IP infringement outside the cap.
Ask for a separate cap on data breach claims, usually two to three times fees.
Trade a lower general cap for a shorter term or an exit right.
We cover this in more depth in our November CLE webinar, with the wording that gets counterparties to agree.
