Payment terms, late fees and auto-renewal in B2B SaaS contracts

Founders spend a lot of time on the liability and data sections of their customer contracts and very little on getting paid. Yet payment and renewal terms are where many B2B disputes start: a customer who stopped using the product but didn’t cancel, a surprise price increase, or an invoice that sits for 90 days.

This post is general information, not legal advice.

B2B is mostly contract, not consumer law

Provincial consumer protection statutes, including Ontario’s Consumer Protection Act, 2002, protect consumers, meaning individuals acting for personal, family or household purposes. A SaaS product sold only to businesses usually falls outside them, so the cancellation and auto-renewal rules that apply to consumer subscriptions generally don’t. If individuals can sign up for personal use, keep separate consumer terms. Our guide to SaaS agreements covers the rest of the contract.

Invoicing and payment

Spell out:

• When fees are invoiced. Annually or monthly in advance, on usage in arrears, or a mix.
• When payment is due. Net 30 from invoice is common for B2B. Card payments are usually charged automatically.
• Currency. Canadian or US dollars, and who bears exchange costs.
• Disputes. A short window for the customer to dispute an invoice in good faith, with the undisputed amount still payable on time.
• Taxes. Fees are exclusive of taxes, and the customer pays applicable GST/HST and other sales taxes. Once you’re past the small supplier threshold, you’ll generally need to register and charge GST/HST.

Late payment interest: the Interest Act

Many templates say “overdue amounts bear interest at 1.5% per month.” In Canada, section 4 of the federal Interest Act says that where a written or printed contract makes interest payable at a rate for a period of less than a year, no interest above 5% a year is recoverable unless the contract expressly states the equivalent yearly rate. A monthly rate on its own can leave you limited to 5%. The fix is simple: state both, for example “1.5% per month (18% per year), calculated and payable monthly, not compounded.” If interest compounds, the annual figure should be the true equivalent rate: 1.5% a month compounded monthly is about 19.56% a year, not 18%.

Keep late interest modest. Section 347 of the Criminal Code makes it an offence to charge interest at a criminal rate, which since January 1, 2025 is an annual percentage rate above 35%, with exemptions set by regulation for some commercial loans. “Interest” for this purpose is broad and includes fees, fines and penalties, so flat late fees added on top of interest can count toward the calculation. Whether an exemption applies depends on the arrangement, so keep combined late charges well below that rate.

Suspension

Give yourself the right to suspend access if an undisputed invoice is overdue past a set period, after written notice. Say that suspension doesn’t end the contract or the customer’s obligation to pay, and set out how access is restored. Suspending without a contractual right can put you in breach.

Auto-renewal

In B2B contracts, an auto-renewal term is generally enforceable if it’s clear and was part of the agreement. Disputes arise when the renewal term was buried or the customer argues it never saw it. To reduce that risk:

• Put the renewal term on the order form, not only in the general terms.
• Say how long each renewal term lasts and how much notice is needed to stop it, such as 30 days before the end of the term.
• Send a renewal reminder before the notice deadline, even if the contract doesn’t require one. Large customers often ask for this.
• Keep records of acceptance, such as a signed order form or a click-through log.

Price increases

Customers accept price changes more readily when the contract sets the rules up front:

• fees are fixed for the current term;
• increases apply only at renewal, with notice, such as 60 days before the renewal date;
• a cap on annual increases, if you’re willing to offer one to larger customers;
• the customer can decline the renewal if it doesn’t accept the new price.

A clause that lets you change fees at any time on notice may be resisted in negotiation and is a weak basis for a mid-term increase.

Refunds and termination

Say whether prepaid fees are refundable if the customer terminates early. A common approach is no refund for termination for convenience, and a pro-rata refund of prepaid fees if the customer terminates because of your uncured breach. Make sure the termination section and the payment section say the same thing.

A checklist for your order form and terms

• Billing frequency, due date, currency and taxes.
• Late interest stated as a monthly and an annual rate.
• A suspension right with notice.
• Renewal term, notice to cancel and a renewal reminder.
• Price increase rules tied to renewal.
• Refund rules that match your termination clause.

We prepare and review SaaS agreements and customer contracts at fixed fees, listed on our fees page. If you’d like your payment and renewal terms checked, book a free 15-minute consult.