A customer signs your SaaS subscription agreement and begins using your platform. Six months later, they claim the software failed to perform as you described in a sales call, that your API produced incorrect results that caused them to make a bad business decision, and that your platform should have been fit for a specific purpose they never disclosed to you in writing. Their counsel cites implied warranties under state commercial law and argues that you never properly disclaimed them.
This is not a hypothetical. Warranty claims arise regularly in SaaS disputes, and they often succeed not because the vendor made explicit guarantees, but because the subscription agreement failed to disclaim implied warranties that attach automatically under applicable law.
A warranty disclaimer is not a provision you include because a lawyer told you to. It is a provision that determines whether a customer can hold you liable for software performance beyond the specific commitments you actually made in your agreement. Getting it right is essential. Getting it wrong — or leaving it out — creates open-ended liability that your limitation of liability clause may not protect against.
1. The Two Types of Warranties in a SaaS Contract
Before understanding how to disclaim warranties, you need to understand what warranties exist and how they arise.
Express warranties are statements, representations, or commitments you make affirmatively. If your sales materials describe the software as “HIPAA-compliant,” your SaaS agreement commits to 99.9% uptime, or your onboarding documentation represents that the platform integrates with a specific third-party tool, you have created express warranties. Express warranties are binding because you made them — you cannot disclaim your own affirmative representations.
Implied warranties arise automatically under law, even if you never say a word about them. The two most important implied warranties in commercial transactions are:
The implied warranty of merchantability, which holds that a product or service is of at least average quality and fit for the ordinary purposes for which it is used. Under the Uniform Commercial Code (UCC), which most US states have adopted in some form, merchants automatically warrant that their goods are merchantable unless the warranty is conspicuously disclaimed.
The implied warranty of fitness for a particular purpose, which arises when a seller knows or has reason to know that a buyer needs the product for a specific purpose and is relying on the seller’s skill or judgment to select or provide a suitable product. If your sales team is aware that a customer is using your platform for a specific compliance-critical application and tells them your software will work for that use case, you may have created an implied warranty of fitness — even without a written contract term addressing it.
2. Do UCC Implied Warranties Apply to SaaS Agreements?
This is one of the most actively litigated threshold questions in technology contract law. The UCC’s implied warranty provisions apply to transactions in “goods” — tangible, movable property. Traditionally, courts asked whether a software transaction was primarily a goods transaction (governed by UCC) or a services transaction (governed by common law contract principles).
Courts have reached inconsistent results when applying this question to SaaS products. Some courts treat SaaS subscriptions as services contracts not subject to UCC implied warranties. Others apply UCC principles by analogy, particularly when the software component of the transaction is dominant. A growing number of states are examining whether updated commercial law frameworks should apply more comprehensively to software and data transactions.
The important practical point: you cannot rely on the uncertainty about UCC applicability to protect you from implied warranty claims. A well-drafted warranty disclaimer disclaims implied warranties under both UCC principles and common law, and does so in language that courts will treat as conspicuous and enforceable regardless of which framework applies.
Leaving the warranty disclaimer out because you believe SaaS is “not a goods transaction” is a legal strategy that may fail — and when it does, the failure is your limitation of liability clause having to absorb warranty-based claims it was not designed to address.
3. The “As Is” Disclaimer: What It Must Say
The most fundamental warranty disclaimer in a SaaS agreement is the “as is” clause. This provision states that the software is provided in its current condition, without any guarantees about its quality, fitness, performance, or suitability for any specific purpose.
To be enforceable, a warranty disclaimer must meet two requirements under UCC Section 2-316 (and analogous state common law rules for services):
The disclaimer must be conspicuous. Courts define conspicuous to mean that a reasonable person in the buyer’s position should have noticed it. In practice, this means the disclaimer should appear in capitalized text or bold formatting, should not be buried in fine print or a subsection with a non-descriptive heading, and should be in a font size consistent with the rest of the agreement. An “as is” disclaimer in 8-point font on page 47 of a standard terms document is unlikely to survive judicial scrutiny.
The disclaimer must specifically mention merchantability. For the implied warranty of merchantability to be disclaimed under the UCC, the word “merchantability” must appear in the disclaimer. A general “no warranties” clause that does not use the word “merchantability” may be insufficient.
A properly drafted disclaimer in a SaaS agreement typically reads:
THE SOFTWARE AND SERVICES ARE PROVIDED “AS IS” AND “AS AVAILABLE” WITHOUT WARRANTY OF ANY KIND. THE COMPANY EXPRESSLY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT. THE COMPANY DOES NOT WARRANT THAT THE SERVICE WILL BE UNINTERRUPTED, ERROR-FREE, OR THAT DEFECTS WILL BE CORRECTED.
This language is capitalized (meeting the conspicuousness requirement), names merchantability and fitness for a particular purpose (meeting the specificity requirement), and covers statutory warranties (addressing state consumer protection laws that may impose additional warranty obligations).
4. Carving Back: What Express Warranties Your Agreement Should Contain
A comprehensive warranty disclaimer does not mean you make no commitments at all. Most SaaS agreements include specific, limited warranties that the vendor is willing to stand behind. The goal is to replace the uncontrolled exposure of implied warranties with precisely defined express warranties.
Common express warranties in SaaS agreements include:
Performance warranty: The software will substantially conform to the published documentation during the subscription term. “Substantially” is a meaningful qualification — it allows for minor bugs and inconsistencies without triggering a warranty breach.
Security warranty: The vendor will implement commercially reasonable security measures appropriate to the sensitivity of the data processed. This warranty is increasingly expected in enterprise contracts but should be carefully limited to avoid creating a strict liability standard.
Compliance warranty: The vendor’s data processing activities comply with applicable law. This warranty is important for customers operating in regulated industries but should be limited to the vendor’s own processing obligations, not the customer’s compliance obligations.
Non-infringement warranty: The software, as provided by the vendor, does not infringe the intellectual property rights of any third party. This warranty is standard but should include a carve-out for infringement caused by the customer’s modifications or third-party integrations.
Sole remedy: Each express warranty should specify the remedy available for a breach — typically, that the vendor will use commercially reasonable efforts to correct a non-conformity, and if unable to do so within a defined cure period, the customer may terminate the affected service and receive a pro-rata refund of prepaid fees.
Defining express warranties with precise scope, duration, and remedy provisions replaces the open-ended exposure of implied warranties with a manageable, defined risk profile. The key provisions in a SaaS agreement framework provides the contractual structure within which these warranty provisions operate alongside limitation of liability, indemnification, and SLA terms.
5. Warranty Disclaimers and Limitation of Liability: How They Work Together
The warranty disclaimer and the limitation of liability clause address different risks and must be designed to work together.
The warranty disclaimer determines what obligations you owe — it limits the scope of your warranty commitments. The limitation of liability clause caps the financial exposure if you breach those commitments. A properly structured agreement needs both.
A limitation of liability clause without a warranty disclaimer leaves you exposed to warranty claims that may be argued outside the scope of the liability cap — particularly if the customer argues that an uncapped carve-out (such as gross negligence or willful misconduct) applies to a warranty-related claim. Courts have found that implied warranty breaches can, in some circumstances, constitute gross negligence or willful misconduct, bypassing liability caps that would otherwise apply.
The reverse problem also exists: a warranty disclaimer without a limitation of liability clause means that even if you successfully limit the scope of your warranty obligations, any breach of an express warranty you do include creates unlimited liability exposure.
The interaction between these provisions is discussed in detail in our analysis of limitation of liability clauses in SaaS agreements. Both provisions should be reviewed as a pair, not in isolation, to ensure they create a coherent, enforceable risk allocation.
6. Third-Party Components and Open Source Disclaimers
SaaS products routinely incorporate third-party libraries, open source components, APIs, and integrated services. Each of these components introduces warranty considerations that require specific contract language.
Third-party components: Your warranty disclaimer should explicitly state that any warranties related to third-party components, services, or integrations are limited to whatever warranties the third-party provider passes through to you — and that you make no warranties about third-party components beyond those pass-through warranties.
Open source components: Open source licenses frequently include their own disclaimers of warranties. The GNU General Public License (GPL), Apache License, and MIT License all disclaim warranties of merchantability and fitness for a particular purpose. Your agreement should acknowledge that open source components are provided under their respective licenses and that the relevant disclaimers apply.
AI-generated outputs: SaaS products that include AI features present a specific warranty challenge — outputs are probabilistic and cannot be guaranteed to be accurate, complete, or suitable for any particular decision. Your agreement should include specific disclaimers for AI-generated outputs that address the probabilistic nature of those outputs and place responsibility on the customer to verify AI-generated content before acting on it.
This is particularly important given current US Copyright Office guidance indicating that AI-generated works without meaningful human authorship may not qualify for copyright protection — a warranty about the copyrightability of AI outputs could expose you to claims you cannot satisfy.
7. State-Specific Consumer Protection Considerations
If your SaaS product serves any consumer customers (not exclusively B2B), warranty disclaimers face additional scrutiny under state consumer protection statutes. Several states limit or prohibit certain warranty disclaimers in consumer transactions, regardless of how clearly the disclaimer is drafted.
California’s Consumer Legal Remedies Act and Unfair Competition Law limit warranty disclaimers in consumer contracts. New Jersey and Massachusetts have similar restrictions. These statutes do not apply to B2B transactions between sophisticated commercial parties, but any SaaS product accessible to individual consumers should be reviewed for compliance with the consumer protection laws of states where those consumers are located.
The contract should clearly define who is a permitted user and whether the product is available only to businesses or also to individual consumers. For pure B2B SaaS platforms, this distinction matters because it determines which warranty rules apply.
Frequently Asked Questions
Can I disclaim all warranties in my SaaS agreement?
You can disclaim implied warranties completely, provided the disclaimer is conspicuous, specifically mentions merchantability, and covers fitness for a particular purpose. However, you cannot disclaim express warranties you have already made — if your marketing materials, sales presentations, or documentation contain specific performance representations, those become binding express warranties regardless of what your agreement says.
Does the “as is” disclaimer protect me if my software has a bug that damages a customer’s data?
A properly drafted warranty disclaimer reduces your exposure to implied warranty claims arising from software defects. However, it does not necessarily protect against all data loss claims. If the data loss resulted from a breach of your express security obligations, a data processing agreement violation, or conduct that rises to the level of negligence, your limitation of liability clause — not just the warranty disclaimer — determines your exposure. Both provisions must be designed to work together.
What is the difference between a warranty disclaimer and a limitation of liability?
A warranty disclaimer limits what you promise — it defines the scope of your warranty obligations. A limitation of liability caps how much you owe if you breach those obligations. You need both. A warranty disclaimer without a liability cap still leaves you exposed to unlimited damages for any express warranty you do include. A liability cap without a warranty disclaimer leaves you vulnerable to implied warranty claims that may be argued outside the cap.
Are warranty disclaimers enforceable in all US states?
Warranty disclaimers between sophisticated commercial parties are enforced in all US states, provided they meet the conspicuousness and specificity requirements of the applicable law. State consumer protection statutes may limit disclaimer enforceability in transactions with individual consumers. For B2B SaaS contracts, the disclaimer is generally enforceable as written when properly drafted.
Do I need a separate warranty section if my SaaS agreement already has a limitation of liability clause?
Yes. A limitation of liability clause caps damages but does not define the scope of what you warrant. Without a warranty disclaimer, implied warranties attach automatically under applicable law, creating obligations you may not have intended. The warranty section and limitation of liability clause serve different functions and both should appear in any SaaS agreement.
Your Warranty Disclaimer Needs to Work as Hard as the Rest of Your Agreement
A SaaS agreement’s warranty section is often drafted as an afterthought — capitalized text copied from an old template that nobody has reviewed in years. If your platform has grown, your feature set has expanded, or you have added AI capabilities, third-party integrations, or new customer segments since your agreement was last reviewed, your warranty disclaimer may no longer reflect the actual risk profile of your product.
If you are a SaaS company that has not had your warranty and limitation of liability provisions reviewed by a technology lawyer, contact Hansen Tong at TOS Lawyer. A review of these provisions as part of a broader SaaS agreement audit takes hours, not weeks, and ensures that the warranty language in your agreement actually protects your business against the claims most likely to arise in a real dispute.