What should I look for when reviewing a software license agreement?
The short answer
A software license agreement for on-premises or perpetual software covers a different set of risks than a SaaS subscription. The key provisions buyers commonly miss include: how seats or devices are counted (and what triggers an audit), whether the license survives if the vendor is acquired or goes out of business, what maintenance and support is actually included versus sold separately, and whether open-source components carry obligations that affect how you can use or modify the software. The agreement defines your rights — not the sales conversation. Scan it to see what the license actually permits and what your ongoing obligations are before you sign.
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What a software license agreement usually does
A software license agreement grants your company the right to use the software under defined conditions — it does not transfer ownership of the code. The license defines who may use the software (named users, concurrent users, devices, or CPUs), for what purposes (internal use, development, resale), and on what terms. Perpetual licenses grant an indefinite right to use the version licensed; subscription licenses expire. The distinction matters: a perpetual licensee needs to understand what 'perpetual' actually covers, because maintenance, support, and updates are often sold separately and may be required to keep the software functioning.
On-premises agreements often include audit rights allowing the vendor to inspect your installations for compliance. They may also include source code escrow provisions that protect your access if the vendor ceases operations, and open-source disclosure schedules identifying components that carry their own license obligations.
Why buyers get caught on the details
The gap between what a software sales team describes and what the license agreement actually says is a common source of post-signature disputes. Buyers report discovering after implementation that the seat count they bought does not cover their actual usage model, that maintenance fees are required to remain compliant, or that open-source components in the product create obligations for their own development work. The agreement is the document that controls — reviewing it before signing is the only way to know what your company is committing to.
What to look for in your agreement
- How the license is measured — named users, concurrent users, device count, or CPU/core count — and whether your actual deployment model fits the definition.
- Audit rights: how much notice must the vendor give, how often can they audit, and what happens if an audit finds a shortfall (typically billed at list price, not your discounted rate).
- Maintenance and support: what is included in the base license fee versus sold as a separate annual maintenance contract, and what version support covers.
- Source code escrow: if the vendor ceases operations or stops supporting the product, does the agreement provide for escrow or access to source code so you can maintain the software?
- Open-source component disclosure: does the agreement identify third-party open-source components, and do any carry copyleft or other obligations that affect your use?
Questions to ask before signing
- Ask the vendor to confirm in writing how seats are counted for your specific deployment model — remote workers, API integrations, and test environments often raise edge cases.
- Ask the other party to clarify whether maintenance is required to remain in compliance with the license, and what support is included at each tier.
- Confirm whether a source code escrow arrangement is available, and which party bears that cost.
- Consider having the agreement reviewed if the license is perpetual, involves a significant upfront cost, or covers software central to your business operations.
Why scan instead of guess
The general rule tells you the baseline. Your agreement tells you what you’re actually being asked to sign — and the wording is what binds. Dang reads the document and flags the clauses worth reviewing, in plain English.
The deterministic engine scores and decides what’s risky. The AI only enriches the plain-English wording — AI extracts, code decides, never the other way around.
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Common questions
What is the difference between a perpetual license and a SaaS subscription?
A perpetual license grants an ongoing right to use a specific software version, often with a one-time fee plus separate maintenance fees. A SaaS subscription provides access to software hosted by the vendor, typically on an annual or monthly basis that can be cancelled. Perpetual licenses carry different risks around version support, audit exposure, and what happens if the vendor is acquired — worth understanding before committing.
Can a vendor audit my company under a software license?
If the agreement has an audit clause — and most do — yes. The clause typically defines how much notice the vendor must give, how often audits can occur, and how shortfalls are priced. The audit rights in your specific agreement are what apply to your company.
No account required · File deleted after analysis · Not legal advice. Dang reports contract findings in plain English — general information, not legal advice about your situation. For consequential decisions, consult a licensed attorney in your state.