What key clauses should we review in a Salesforce contract?
Answer: You’ll want to scrutinize several critical clauses in the Master Subscription Agreement (MSA), and order forms: Salesforce Renewal terms, termination conditions, usage commitments, service levels, and data handling rights are at the top. Specifically, look at:
- Renewal/Auto-Renewal Clauses: Salesforce often auto-renews contracts unless notice is given. Check how long you must notify Salesforce to cancel or change (commonly 30-60 days). Also, watch for any price uplift on renewal (some contracts allow Salesforce to increase prices by a fixed percentage at renewal).
- Termination and Early Termination: Understand under what conditions you or Salesforce can terminate. Typically, you can only terminate for cause (material breach with 30 days to cure), and early termination by the customer for convenience is not allowed without paying the full contract value as a penalty. Ensure you negotiate a clause for data retrieval upon termination (e.g., 60 days to export data).
- Non-Cancellation / User Commitment: Salesforce’s standard terms state that the number of licenses purchased cannot be decreased during the term. That means you pay for all seats you committed to, even if you don’t use them. This is crucial to know and potentially negotiate (for instance, allowing some downward adjustment at renewal or a “ramp” plan).
- Service Level Agreements (SLA): Salesforce’s MSA promises “commercially reasonable efforts” for uptime but no strict uptime guarantee by default. Check if there’s an SLA addendum for uptime or support response times, and if not, consider negotiating one, especially if your business is mission-critical on Salesforce.
- Liability and Indemnification: Review the caps on liability (Salesforce typically caps liability at the fees paid and excludes consequential damages) and indemnification clauses (usually, Salesforce will indemnify you for IP infringement, and you indemnify Salesforce for your data or misuse). Ensure these are standard and acceptable for your company’s risk tolerance.
- Data Security and Privacy: Look for data protection terms or a Data Processing Addendum (if needed for GDPR compliance). Ensure the contract clarifies that you own your data and Salesforce will handle it per privacy laws.
Each of these clauses can greatly impact your risk and cost. It’s wise to have legal counsel review the MSA, focusing on these areas. Many customers have been caught off guard by auto-renewals or the inability to reduce licenses, so spend time on the fine print now to prevent pain later.
Read our Salesforce Negotiations Pricing FAQs.
Is there an automatic renewal clause in Salesforce contracts?
Answer: Yes, most Salesforce agreements have an automatic renewal clause. By default, when your initial term ends, the contract will automatically renew for a subsequent term (often one year) unless you give advance written notice to cancel.
The advance notice period is typically specified (commonly 30 days before the end of the term, but check your contract). For example, you might have a 3-year contract that auto-renews for 12 months in the end unless you notify Salesforce 30 (or 60) days prior that you intend to terminate at term-end.
Automatic renewal means that if you do nothing, you’re on the hook for another year of subscriptions—potentially at higher rates if a price increase clause is in effect. So, it’s critical to document the notice deadline.
Many companies negotiate this clause: you can try to remove auto-renewal or extend the notice period. At a minimum, set reminders well in advance so you can proactively renegotiate or cancel if needed. Salesforce sales teams often reach out before renewal but don’t rely solely on that. In summary, assume auto-renew is in there and manage it accordingly.
Can we reduce the number of user licenses during a contract term?
Answer: No, not under the standard terms. Salesforce contracts state that quantities purchased are committed for the full term – “quantities purchased cannot be decreased during the relevant subscription term.” If you signed up for 100 users a year, you must pay for all 100 for the entire year, even if your user count drops or you don’t deploy them all. You cannot simply drop to 80 licenses and pay less in the middle of the contract.
This is a common pain point: if you over-estimate needs, you’re stuck with excess licenses until renewal. Very large enterprise customers sometimes negotiate special flexibility (e.g., reducing some portion at renewal or having a one-time reduction right), but that’s not typical.
Plan your license count carefully to avoid over-buying. If you anticipate possible decreases (due to seasonality or business changes), discuss options with Salesforce during negotiation – but expect resistance.
Generally, you can increase your licenses mid-term (paying a prorated amount), but you can’t reduce it and get money back or credit. This is why some organizations opt for shorter terms or phased rollouts. The bottom line is that license counts are locked in for that term once signed.
What are typical termination clauses in Salesforce agreements?
Answer: Termination for cause is allowed, but termination for convenience is not (from the customer side). The Salesforce MSA typically says either party can terminate the agreement for cause if the other materially breaches and doesn’t cure within 30 days of notice. Examples of cause are non-payment by customers or Salesforce failing to uphold a material contract term (though there are few obligations on Salesforce beyond providing the service). Salesforce can also terminate if you violate usage terms or applicable laws.
If Salesforce terminates you for cause (e.g., you breached and didn’t cure), they can also delete your data after a short period, so that’s serious. Termination for convenience (ending the contract when you want, for no specific breach) is not something Salesforce allows customers – you’re expected to fulfill the term length you signed.
Salesforce generally doesn’t terminate customers without cause during a term, except possibly if required by law or if the customer is in material breach (including non-payment). It’s worth noting that some customers have reported Salesforce threatening or enacting termination for non-payment disputes on short notice (even though the contract says 30 days, in practice, there were complaints of quicker action). As a safeguard, you might negotiate a longer cure period or specific data retrieval assistance if termination happens.
Also, pay attention to early termination liability: If, for some reason, you need to exit early, Salesforce contractually can require 100% of the remaining fees as a penalty (effectively no relief). Given these terms, it is always best to ride out the term or negotiate a reduction at renewal rather than default.
Are there penalties for ending a Salesforce contract early?
Answer: Yes – very steep ones. If you terminate the contract early outside of the permitted terms, you are typically liable for all fees for the remainder of the term. In other words, you’d still owe Salesforce the full subscription cost for the entire agreed term even if you stop using the service.
Salesforce’s contracts don’t allow customers to exit early without cause without paying out the contract. Instead, an early termination fee is equal to the remaining contract value (sometimes called “acceleration” of fees). If you want to cancel partially, unused services are usually not refunded.
In short, the penalty for early termination is the financial obligation you already committed to. This is why negotiating a shorter term or including performance opt-outs is important if you’re worried about being stuck.
One possible exception: if Salesforce breaches the agreement materially and you terminate for cause, you’d typically not be on the hook for future fees (and might even get a prorated refund for the unused period, though Salesforce’s liability limitations often cap any refunds). But terminating simply because you want to switch CRM or reduce scope? – expect to pay out or negotiate a very unusual concession.
Always check the contract’s termination and “acceleration” clause: it will spell out that all unpaid fees for the term become immediately due if you break the contract. Essentially, Salesforce contracts bind you for the term under penalty of full payment.
How do renewal terms typically work with Salesforce?
Answer: Renewals with Salesforce are usually annual (or term-based) extensions of your contract, often at then-current rates unless otherwise negotiated. A few things to know:
- Notification: As discussed, there’s often an auto-renewal. If you don’t want to renew or want to change quantities, you must notify Salesforce in advance (per the contract).
- Pricing: If your initial term had a special discount, Salesforce may not automatically extend that discount to renewals. Many customers face significant price hikes at renewal if they haven’t locked in pricing. It’s common to hear of a 7-10% or more increase by default. Salesforce might include a price uplift clause allowing a 7% increase on renewal. They might still raise you to the list price or a lower discount if not. Discounts can be lost at renewal if not negotiated upfront.
- Co-terming: If you added products or users mid-term on a coterminous schedule, all those come up for renewal together. This is convenient but means your renewal negotiation might cover a larger bundle of things.
- Renewal negotiations: Salesforce sales teams treat renewals as a time to possibly increase your account value (“uplift”). They often plan for at least a 10% growth in your spending. So, come to renewal discussions prepared – it’s an opportunity to negotiate again (either securing a better discount to maintain or lowering your cost or at least capping any increase). If you simply let it auto-renew, you could end up paying more.
- Duration: At renewal, you could opt to renew for a different term length. For example, you might go from a one-year to a three-year renewal if that fits your needs (negotiate that accordingly), or vice versa.
In summary, never ignore the renewal – engage 3-6 months before it to revisit pricing and terms. Try to bake in renewal protections in your initial deal (like caps on price increases or multi-year discounts). Otherwise, expect that Salesforce will attempt to raise rates or upsell you at renewal, and you’ll need to negotiate to keep costs in line.
What is a price uplift clause in a Salesforce contract?
Answer: A price uplift clause is a contract provision that allows Salesforce to increase the subscription price at renewal by a certain amount. It’s a pre-agreed inflation or increase rate. For example, your contract might state that prices may increase by up to 7% (or a set percentage) from the prior term upon renewal. Some clauses are fixed (e.g., exactly a 5% increase each year), and some allow Salesforce discretion up to a cap. This means you’re contractually accepting those future hikes.
Not all Salesforce contracts have explicit uplift clauses – some just say renewal will be at then-current list prices (which indirectly could be higher). When present, these clauses set expectations: Salesforce often argues it covers rising costs or added value.
From a negotiation standpoint, you should limit or eliminate price uplift clauses. For instance, negotiate a cap (no more than a 3% increase per year) or, ideally, no increase for a certain number of years. The clearer and lower the uplift, the better for cost predictability. If Salesforce insists on some uplift, ask for justification or tie it to something like a public index, but usually, it’s a flat percent.
In short, a price uplift clause is a built-in price raise for future periods—always check if it’s in your contract and negotiate it down. Many customers manage to renew with a 0% increase, but only by negotiating; if the contract allows an automatic 7%, Salesforce can simply apply that.
How can we negotiate limits on price increases at renewal?
Answer: Negotiating renewal caps upfront is key. Here are strategies:
- Explicit Cap in Contract: Push to include language that any renewal price increase is capped at a certain percentage (e.g., “not to exceed X%”). For example, stipulate no more than 3% annual increase. This gives you a worst-case ceiling.
- Multi-Year Agreement: If you commit to multiple years, you can often lock pricing for that term. Even if it’s not fully flat, you might negotiate set pricing per year (e.g., Year 2 and 3 prices are predetermined or only slightly higher).
- Benchmark/Competitive Leverage: Let Salesforce know you’re considering competitors or have benchmark data. Showing their proposed renewal price isn’t market-competitive can pressure them to limit increases. Essentially, “If you try to raise us 10%, we might re-evaluate alternatives.”
- Extension of Discounts: Ensure any discount you got initially is explicitly stated to carry into renewals. For instance, negotiate a clause that renewal pricing will maintain the same discount percentage off the list as the initial term. That way, you still keep your relative discount if list prices increase.
- No Uplift without Notice: If possible, require that any increase be communicated and mutually agreed upon during renewal negotiation, not automatic. This at least forces discussion rather than an automatic hit.
- Performance or Value Justification: Another angle is to tie increases to added value—e.g. if Salesforce introduces significant new features you use. If you’re forced to accept an increase, ask for something in return (additional services, more licenses, etc.).
Practically, Salesforce may have a standard they try (say 7-10%). Many customers successfully negotiate that down or away by starting the conversation early and leveraging their intent to renew only under acceptable terms.
Remember, once you sign a contract with a built-in uplift, you’ve given up leverage – so handle it in initial negotiations. Use language like “Prices shall remain flat for the first 3-year term; any renewal increase shall not exceed 3%.” And get it in writing.
What is a “true-up” clause, and how does it work in Salesforce contracts?
Answer: A true-up clause reconciles license usage against what was purchased. In Salesforce, a true-up typically means that if you end up using more licenses than you initially contracted for, you agree to pay for the overage, often retroactively.
For instance, suppose you contracted for 500 users but added 50 more during the year without formalizing it. At true-up (usually at renewal or periodically), Salesforce will require you to true-up and pay for those extra 50 users (often from when they were first used).
True-up clauses ensure Salesforce gets paid for any “excess” usage beyond your original commit. It’s common in enterprise agreements where you might have the flexibility to deploy more and settle up later.
Note: With Salesforce’s cloud model, it’s hard to quietly exceed user counts because adding a user means buying a license in the system. So true-ups more often apply to things like API overages or similar scenarios, but generally, Salesforce prefers you to purchase upfront rather than after the fact. Some large customers do annual true-ups for certain products.
If you have such a clause, watch for:
- Retroactive Charges: Salesforce might charge from when the extra usage began, not just from discovery.
- Data/Usage True-ups: In consumption models (like Marketing Cloud contacts), they might true-up if you consistently exceed a tier.
- Monitoring: You must track licenses to avoid surprise true-up bills.
To manage this, negotiate clarity on how true-ups are measured and charged and possibly a grace period to adjust usage without penalty. Some contracts allow you to exceed by X licenses and only charge in the future, etc.
A true-up clause says, “We’ll audit your usage, and if you used more, you pay more.” It’s better to formally add licenses as needed (so you know the cost) rather than rely on a true-up later.
What service level agreement (SLA) does Salesforce provide for uptime?
Answer: Salesforce’s standard SLA for uptime is not a hard guarantee—the MSA states that Salesforce will use “commercially reasonable efforts” to make the service available 24/7. By default, the contract does not promise a specific uptime percentage.
In practice, Salesforce publishes trust site metrics and often achieves around 99.9% uptime annually, but they don’t contractually commit to 99.9%. Salesforce’s guaranteed uptime (contractually) might be as low as 98% in some cases (below many industry peers), although that figure caused some stir.
The key is that you have no automatic recourse without a custom SLA addendum if Salesforce has downtime. Under the standard agreement, they do not typically offer credits for downtime.
However, Salesforce rarely has prolonged outages (their infrastructure is robust, though no service is perfect — e.g.; there was a notable multi-hour outage in May 2019). If uptime is mission-critical, you can attempt to negotiate an SLA addendum where Salesforce commits to a percentage (like 99.9% uptime) and possibly credits if not met. This usually only succeeds for very large customers or those in regulated industries. Most customers rely on Salesforce’s generally good track record.
Summary: Out of the box, the SLA is “we’ll try our best,” with no numeric guarantee or penalty. For most, that suffices given Salesforce’s reputation, but know that the uptime SLA is contractually weak unless you negotiate it.
Does Salesforce offer financial credits or penalties if SLAs are not met?
Answer: Under the standard agreement, no – Salesforce does not provide automatic service credits for not meeting any SLA because there isn’t a firm SLA to begin with (as noted, only “reasonable efforts” for uptime). Unlike other cloud providers (e.g., AWS or Microsoft) that give credits if uptime falls below a threshold, Salesforce’s typical contract has no such credit policy. If Salesforce has an outage or performance issue, you can complain and work with your account team, but you won’t get a bill credit unless they choose to do it as an accommodation.
If you get a formal SLA addendum, you can negotiate SLA credits. A few customers have obtained a custom SLA where, for instance, if uptime drops below 99.9% in a month, they get X% of that month’s fee as credit. This is not common and is usually reserved for huge contracts where the customer has a lot of pull.
Another scenario: if you’re using a specific Salesforce-managed service (like Marketing Cloud’s email sending), there might be separate reliability guarantees, but generally not. Also, note Salesforce Premier Support isn’t an SLA credit situation either – it offers faster response times, but if they miss those targets, you don’t get credits; you just escalate through support.
In summary: Out-of-the-box, no credits for downtime. You’re paying for access; if it’s down, you’ve lost that time, but Salesforce doesn’t automatically compensate. If this is a concern, push for an SLA with penalties in the negotiation, but manage expectations since Salesforce knows its position in the market. Many customers accept the risk given Salesforce’s historically high uptime or mitigate it via redundant systems for critical functions.
What are Salesforce’s obligations regarding data security and privacy in the contract?
Answer: Salesforce’s contract (MSA) includes data security and privacy commitments, which are somewhat generalized.
Key points:
- Salesforce will treat your data as confidential and implement reasonable security measures. They have extensive security controls (physical, network, and application security) as described in their Trust and Compliance documentation.
- Salesforce often cites its security standards and certifications (ISO 27001, SOC audits, etc.) as the measures it takes contractually.
- For privacy, Salesforce will not use your Customer Data except to provide the services—meaning they won’t mine it for their purposes or disclose it except as legally required or as you permit.
- The MSA usually requires Salesforce to maintain appropriate administrative, physical, and technical safeguards to protect the security of your data.
- You retain ownership of your data – the contract clarifies the customer owns all data input into Salesforce (Salesforce is just the custodian).
Regarding privacy law compliance, Salesforce offers a Data Processing Addendum (DPA) that incorporates GDPR requirements, including committing to assisting with data subject requests and breach notifications. Salesforce has updated its DPA to include the latest EU Standard Contractual Clauses for data transfers. So, if you operate in jurisdictions like the EU, you’ll sign that DPA as part of the contract package.
In short, Salesforce takes on the role of data processor, pledges to secure and use data only for business purposes, and provides contractual documents to meet regulations.
They typically do not offer strong liability if a breach happens – their liability is capped as per the contract (meaning if they have a data breach, you might get out of the contract, but you won’t get huge damages paid out – liability is limited).
Make sure to sign the DPA and review security exhibits. If you have specific security needs (e.g., all data encrypted at rest with keys you control via Shield or data residency), address those in negotiations. However, Salesforce’s security obligations are generally industry-standard and have satisfied many enterprise security teams.
Who owns the data you store in Salesforce, and can you export it?
Answer: You (the customer) own all the data you store in Salesforce. Salesforce’s agreements make it clear that the customer retains ownership of their data – Salesforce is just hosting and processing it on your behalf. They explicitly state that all content and data you put in the system is yours, and they won’t sell it or use it beyond providing the service.
Yes, you can export your data anytime. Salesforce provides multiple ways to get data out—reports, data export tools, APIs, etc. A Weekly Export service (or monthly for some editions) lets you download all data. And via the API or third-party tools, you can continuously sync or back up data.
If your contract ends, export your data before termination (or within any grace period). The contract usually says you can retrieve your data for a certain period (e.g., 30 days) after termination upon request. It’s smart to negotiate a bit more time if you can (Gartner recommends 60 days for data retrieval) to ensure you have enough window. Salesforce will delete your data from their systems after contract termination (usually 30 days after, per their policy) to meet security/privacy commitments.
So, plan to export everything (accounts, contacts, opportunities, files, attachments, etc.) before your access is gone.
The good news is that Salesforce does not hold your data hostage—you have the tools to get it out, but it’s your responsibility to use them. Many customers perform at least annual full backups to have an archive independent of Salesforce.
In summary, the data is yours, and you can export it; just ensure you do so before leaving the service or as part of any transition plan.
What should we know about Salesforce’s payment terms and billing frequency?
Answer: Salesforce typically bills annually upfront. Even though pricing is quoted per user per month, the standard practice is to invoice the whole year (12 months) in advance at the start of the term. Unless you negotiated something else, they usually bill multi-year deals one year at a time (each year in advance).
Salesforce rarely allows monthly or quarterly payments, though exceptionally large deals might get a different billing schedule. Payment terms (when you pay the invoice) are usually Net 30 days. It’s important to align this with your finance department to avoid lapses—non-payment can lead to suspension.
There are also late payment interest clauses (if you pay late, Salesforce can charge interest on overdue amounts, often ~1-2% per month or whatever is legal). Salesforce also collects any applicable taxes on the bill (so if your company is tax-exempt, provide that paperwork). Billing is often done electronically.
Another detail: if you add licenses mid-term, Salesforce will immediately bill a prorated amount for those additional licenses through the end of your current term (to co-term them). So, you might get a mid-year invoice if you expand usage. There is no proration for reductions (since you can’t reduce mid-term as discussed).
Also, Salesforce sometimes includes an “uplift” in multi-year deals, where they invoice each year with an increase (for example, Year 2 invoices 5% higher than Year 1)—check if your order form has such staged pricing.
If cash flow is an issue, you can try negotiating billing terms (like semi-annual payments), but Salesforce prefers upfront as it’s standard.
In summary: Expect to pay annually upfront, net 30. Ensure your procurement and finance plan for that lump sum each year. If multi-currency or multiple orgs, you might have separate invoices per region/entity, so clarify the billing entity.
One more thing: always confirm the “billing start date.” – sometimes, if you sign but won’t go live for a month, you could negotiate the subscription to start upon go-live to avoid paying for unused time. Otherwise, billing usually starts on a contract signature or a specified start date and runs full term.
How are price increases handled in the contract?
Answer: If not negotiated otherwise, price increases are at Salesforce’s discretion at renewal. During your committed term, the price is fixed. However, once you hit renewal, Salesforce can raise the price to the current list or apply an uplift if the contract allows it. Many customers see an attempted increase at renewal time (which is why renegotiation is important).
Some contracts explicitly include a price increase schedule (e.g., 7% at renewal). If there’s no mention, Salesforce could theoretically try to charge the full list price when renewing. In practice, they often propose something like “your discount was 20%, we’re reducing it so your price goes up 10%” or similar.
Salesforce AEs are incentivized to increase account value, so expect a bump if you do nothing. One article noted that the price would “inevitably keep going up (by ~10% on average)” if you simply renew without pushback.
To combat this, you must either negotiate a renewal cap in your initial deal or negotiate anew at renewal. The contract might also handle increases for multi-year deals: sometimes, Years 2 and 3 are predetermined or have a fixed escalator. If you signed a multi-year contract with flat pricing, no increases will happen during that term.
Another nuance: Salesforce’s overall list prices can increase (as happened in 2023 with a roughly 9% list hike after years of no change). If your discount is off the list, a list price hike effectively increases your price unless you locked the absolute dollar amount.
In summary: The contract doesn’t guarantee any increase unless specifically stated; it usually leaves room for Salesforce to charge the rates in effect at renewal. So, procurement should proactively address price increases via contract language or active negotiation at each renewal cycle.
If Salesforce mentions an increase, use it as an opening to discuss extending/expanding the deal in exchange for holding or reducing the price. They often plan +10%, but with the effort, you might settle closer to +0–5% or even maintain the price flat if you have alternatives or leverage.
What are typical liability and indemnification terms in Salesforce’s contract?
Answer: like most SaaS providers, Salesforce limits its liability heavily in the MSA.
The typical setup:
- Liability Cap: Salesforce’s liability for damages arising out of the contract is capped at an amount equal to the fees you paid (often the last 12 months of fees). This means if Salesforce causes you harm (like service downtime that costs you money), the maximum they’d potentially reimburse is what you paid them in that period.
- Exclusion of Consequential Damages: The contract will state neither party is liable for indirect damages such as lost profits, revenue, goodwill, or data, etc. So if Salesforce downtime caused you $1M in lost sales, that’s indirect loss and they are not on the hook for that under the contract.
These limitations apply except for a few exceptions, usually breaches of confidentiality or perhaps certain IP indemnification obligations, where they might carve out the cap (meaning that for those specific issues, the cap might not apply or might have a higher cap). However, generally, Salesforce does not accept open-ended liability.
From a procurement angle, these caps are standard and rarely changed significantly by Salesforce. You can attempt to negotiate a higher cap or carve-outs (for example, ask that Salesforce have unlimited liability for its willful misconduct or data breach) – but expect pushback. Many enterprise customers accept the standard cap after trying.
Indemnification:
- Salesforce will indemnify you for intellectual property infringement – meaning if a third party claims Salesforce’s software infringes their patent or copyright and tries to sue you, Salesforce will defend and cover costs/damages. They often have some conditions (e.g., you must notify them and let them control the defense, etc.). If Salesforce can’t resolve an IP issue, they might try to modify the software or, as a last resort, terminate your contract and refund you prepaid fees. This indemnity is important because it protects you from being dragged into an IP lawsuit just for using Salesforce.
- You (the customer) may be asked to indemnify Salesforce if your data or use violates someone’s rights or the law. For example, if you upload illegal content or infringe on someone’s copyright using Salesforce and get sued, you would indemnify Salesforce. Also, if you integrate Salesforce in a way that violates a third-party agreement, etc. Essentially, you promise not to make Salesforce liable for your misuse.
These are normal; just ensure the mutual obligations are clear. Indemnities usually have no monetary cap for the indemnifying party (meaning Salesforce’s indemnity of you isn’t capped by the liability cap in some contracts – check if the limitation of liability carve-out covers indemnities).
In summary, Salesforce limits its financial risk to the subscription fees you pay and disclaims big damages. Each party agrees to protect the other in specific situations (Salesforce covers IP issues with its product, and you cover misuse). Reviewing these with legal is prudent, but most are non-negotiable boilerplate in Salesforce deals.
