Today, every business requires innovative technologies to streamline its daily operations and meet the clients’ needs as speedily as possible. Managing paperwork and other manual tasks waste too much time, reducing productivity. All the data could be transferred online and updated regularly with cloud and on-premises solutions.
If you are a business owner or an IT department specialist and you find a reliable developer to optimize your business workflow, you will need to prepare a software development agreement. This legal document is essential to clarify negotiations with vendors or developers who agree to technically equip your company. When you use a contract for software development services, you can always refer to it to learn more about the whole process, including assignment of liability, deadlines, key points agreed to between the parties, payment of legal fees, and other contingencies.
In this article, you will find detailed information on software project agreements. Plus, you can download free software development contract templates in PDF and Word.
A software developer agreement, or a contract for software development services, is a legal document that specifies the software services to be performed or delivered, stating all the main requirements, terms and conditions of the project being developed by the vendor for you as a client.
The law recognizes software programs, code, and applications to be valuable intellectual property (IP) entitled to protection from unauthorized use. If the developers do not authorize and officially license you to use their software application, you might face a copyright infringement lawsuit. To learn more about preventing a breach of intellectual property rights, you can read our recent article.
Software developer agreements have different components you should focus on. For example, the project’s budget, the exact development services to be provided, anticipated timeframes and deadlines for delivery, etc. We will explain each part of a software development contract in detail.
There are 3 types of software development agreements:
Fixed-cost agreements work best for companies that already know what kind of software they need. They can precisely describe their requirements to the vendors or developers, and the software producers need to meet their client’s demands within a definite budget.
Fixed-fee contracts are your best option if you meet the following description:
Fixed-cost agreements can also include bonuses that you provide to developers if they finish their tasks on time or before the delivery date.
T&M software development agreements are considered flexible for both parties. You can use this type of contract if you lack software development expertise but do not need to create a software solution from scratch.
If you cooperate with experienced vendors or developers, you can ask them for recommendations on your desired software project or allow them to implement and manage the whole development process. Within this work mode, you pay developers only for the number of hours they spent designing your project.
You can use Time & Material software development contracts in these cases:
Dedicated Team contracts are the best option for large companies and enterprises demanding long-term and thorough software development. For such projects, outsource IT teams are the most perfect.
You can also hire recruiters to help you find appropriate IT developers who will work on your project for a particular duration. However, bear in mind that you will have to pay fees to your recruiter and the IT specialists.
Here are the key points to include in a Dedicated Team agreement:
Any size company in any industry working with a solo developer or a full IT team on a contracting basis can use software project agreements.
Whether you’re planning a completely new application for your work needs or want to apply an already existing one, you should rely on a software development services agreement to formalize your relationship with the IT professionals stating the developers’ duties and warranties beforehand.
A simple software development contract includes the following sections:
These are the common sections that may depend on the type of software developer agreement and your workflow specifications.
This Software Development Agreement (“Agreement”) is made and effective [DATE], by and between [NAME] (“Developer”) and [NAME] (“Customer”).
1.1. “Confidential Information” shall mean all material and information supplied by Customer that has or will come into Developer’s possession or knowledge of Developer in connection with its performance hereunder. Confidential information does not include information that:
(a) is or becomes public knowledge through no fault of Developer;
(b) Developer knew before Customer disclosed it;
(c) Developer obtains from sources other than Customer who owe no duty of confidentiality to Customer; or
(d) Developer autonomously designs.
1.2. “Developer’s Duties” shall mean a listing of all items to be delivered to Customer under this Agreement.
1.3. “Developer’s Duties” shall mean a work that is based on any preexisting works, such as a revision, modification, translation, abridgement, condensation, expansion, or any other form in which such preexisting works may be recast, transformed, or adapted, and that, if prepared without authorization of the owner of the copyright in such pre existing work, would constitute a copyright infringement under the United States Copyright Act.
1.4. “Source License Agreement” means the terms under which Software is licensed in source code form to the general public for use without charge, including without limitation any license agreement that
(a) conditions the use or distribution of any Software program that incorporates such Software on the disclosure, licensing or distribution of the source code of such program (including such Software) and
(b) otherwise materially limits a licensee’s freedom of action with regard to seeking compensation in connection with licensing or distributing such program or Software in object code form, including without limitation the GNU General Public License or the GNU Lesser General Public License.
1.5. “Software” means Software licensed pursuant to the terms of an Open Source License Agreement.
1.6. “Schedule” shall mean the delivery dates for each Developer’s Duty.
1.7. “Specifications” shall mean the specifications for the Software as directed by Customer, together with any modifications that may be agreed to in writing by the parties during the term of this Agreement.
2. Main Responsibilities
2.1. Specifications. Customer shall specify the Specifications, Developer’s Duties, and Schedules [with input from Developer].
2.2. Development. Developer shall design, develop, and implement the Software in accordance with the Specifications, Developer’s Duties, and Schedule.
(a) Training Frame. Developer shall provide Customer with [HOURS] of training OR such training as may reasonably be requested by Customer on the use of the Software.
(b) Training Dates and Locations. The training will be conducted on such dates and locations as the parties may agree.
2.4. Maintenance. Developer shall perform remedial and preventive maintenance for the Software after its acceptance so that the Software continues to perform in accordance with the technical design. Customer and Developer shall negotiate the terms and price of such maintenance services, but Developer shall not charge Customer more than [MAXIMUM AMOUNT] per year for the first two years of maintenance services after acceptance of the Software. Customer shall have the right to terminate such maintenance services at any time upon thirty (30) days written notice to Developer. Developer shall have the right to terminate such maintenance services upon thirty (30) days written notice to Customer if Customer is in material breach of the maintenance agreement between Customer and Developer and remains in material breach for such thirty (30) days.
3. Delivery and Acceptance
3.1. Acceptance Period. Customer will have [TIME PERIOD] following the date of [delivery OR launchment] to assess and test the Software.
3.2. Completion. If Developer delivers the Software in accordance with the Specifications, Deliverables, or Schedule, then Developer shall be deemed to have completed its delivery obligations.
3.3. Rejection. If Developer fails to deliver the Software in accordance with the Specifications, Developer’s Duties, or Schedule, then:
(a) Notification. Customer shall detail in writing its grounds for rejection; and
(b) Rectification. Developer shall [immediately OR use its best efforts to] correct the Software and upon delivery of such correction, the process of acceptance, completion, and rejection shall restart.
(c) Continued Failure. If the Developer’s corrections fails to deliver the Software in accordance with the Specifications, Developer’s Duties, or Schedule, then Customer may elect to:
(i) terminate the agreement, or
(ii) adjust the Specifications, Developer’s Duties, or Schedule.
4.1. Change Orders. Customer may request changes to the Specifications, Developer’s Duties, or Schedules.
4.2. Additional Time or Expense. If the suggested change will, in the reasonable opinion of Developer, require a delay in delivery of the Software or would result in additional expense, then:
(a) Customer and Developer shall confer; and
(b) Customer may choose to either:
(i) cancel its suggested change, or
(ii) require Developer to deliver the Software with the suggested change, subject to the delay and/or additional expense.
If Developer cannot or chooses not to accept the change order, then Customer may elect to terminate the agreement.
5.1. Development Costs. Customer shall pay Developer:
(a) $ [INITIAL AMOUNT] down payment; and
(b) $ [FINAL AMOUNT] upon delivery according to the Specification OR Acceptance.
5.2. Costs. [Subject to Customer’s prior approval] Customer will reimburse Developer for all reasonable expenses incurred by Developer during the development of the Software.
5.3. Training Costs. The training shall be provided at the rate of [TRAINING COST RATE].
6. Ownership of Software. Developer agrees that the development of the Software is “work for hire” within the meaning of the Copyright Act of 1976, as amended from time to time, and that the Software shall be the sole property of Customer. Developer assigns to Customer its entire right, title and interest in anything created or developed by Developer for Customer under this Agreement (“Product”) including all patents, copyrights, trade secrets and other proprietary rights. This assignment is conditioned upon full payment of the compensation due Developer under this Agreement.
7. Term. This Agreement shall commence upon [DATE] and continue until all of the obligations of the parties have been performed or until earlier terminated as provided herein.
8.1. No Infringement. Developer represents and warrants that the Software will not infringe any patent, copyright, trademark, trade secret or other proprietary right of any person.
8.2. No Third Party Property. Developer represents and warrants that it will not use any trade secrets or confidential or proprietary information owned by any third party in developing the Software.
8.3. No Obligation. Developer represents and warrants that neither Developer nor any other company or individual performing services pursuant to this Agreement is under any obligation to assign or give any work done under this Agreement to any third party.
8.4. No Open Source. Developer warrants that the Software does not contain any other Software.
9.1. Performance. Developer warrants that for a period of [TIME PERIOD], the Software will operate substantially according to the Specifications.
9.2. Repair or Replace. Developer will repair or replace the System during such [TIME PERIOD] as soon as possible after Customer informs Developer of any breach of this warranty.
9.3. Exclusions. This warranty excludes any claims based on defects in the Software caused by Customer, other parties beyond the control of Developer, or the hardware.
9.4. No Other Warranties. There are no express or implied warranties, including the implied warranties of merchantability and fitness for a particular purpose, respecting this Agreement, the Software or Services.
10. Acknowledgement-Relationship of the Parties
10.1. Independent Contractor. Developer is an independent contractor and is not an employee or agent of Customer.
10.2. No Partnership. Nothing in this Agreement creates a partnership or joint venture between the parties.
11. Escrow of Source Code
11.1. Delivery of Object Code. Customer agrees that the Software developed under this Agreement shall be delivered to Customer in object code form only.
11.2. Escrow of Source Code. Developer agrees that one copy of the source code version of the Software and associated documentation shall be deposited with an escrow agent specializing in software escrows to be mutually agreed upon in writing by Developer and Customer after good faith negotiation.
11.3. Delivery and Update of Source Code. The source code shall be delivered to the escrow agent within [NUMBER OF DAYS] days after delivery of the object code to Customer. Thereafter, the source code version of all updates, enhancements and modifications of the Software created by Developer on Customer’s behalf, as well as associated documentation, shall be deposited by Developer with the escrow agent. Customer shall pay all fees necessary to establish and maintain the escrow.
11.4. Contingent License. Developer hereby grants to Customer a contingent license to receive the source code from the escrow agent and to use the source code to support its use of the Software in machine-readable form if one or more of the following conditions occurs:
(a) Developer, whether directly or through a successor or affiliate, ceases to be in the software business.
(b) Developer fails to fulfill its obligations to maintain the Software as provided in this Agreement.
(c) Developer becomes insolvent or admits insolvency or a general inability to pay its debts as they become due.
(d) Developer files a petition for protection under the U.S. Bankruptcy Code, or an involuntary petition is filed against it and is not dismissed within 60 days.
12. Confidentiality. During the term of this Agreement and for [TIME PERIOD] afterward, Developer will keep the Confidential Information private and secure.
13. Indemnification. If any third party brings a lawsuit or proceeding against Customer based upon a claim that the Software breaches the third party’s patent, copyright or trade secrets rights, and it is determined that such infringement has occurred, then Developer shall hold Customer harmless against any loss, damage, expense or cost, including reasonable attorney fees, arising from the claim.
14. Limitation of Liability. Neither party shall be liable for any special, indirect, incidental or consequential damages (including damages for loss of business, profits or any other loss) incurred or suffered in connection with the Software.
15.1. Termination for Cause. This Agreement may be terminated by either party upon written notice to the other, if:
(a) the other party breaches any material obligation; and
(b) the breaching party fails to cure such breach within [TIME PERIOD] of receipt of the notice.
15.2. Effect of Termination
(a) Payment of Outstanding Fees. Customer shall pay Developer for all services rendered and work performed up to the date of termination.
(b) Return or Destruction. Within [TIME PERIOD] after the termination or expiration of this Agreement, Developer shall return, or at the option of Customer, Developer shall destroy all copies of Confidential Information and shall deliver written certification by an officer of Customer that Customer has complied with these requirements.
16. General Provisions.
16.1. Dispute Resolution. Any controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction.
16.2. Notices. Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or a recognized overnight delivery service such as FedEx.
If to Developer: [DEVELOPER ADDRESS]
If to Customer: [CUSTOMER ADDRESS]
16.3. Entire Agreement. This Agreement contains the entire agreement between the parties and supersedes all understandings and agreements whether written or oral.
16.4. Amendment. No amendment or modification of this Agreement is valid unless in writing, signed by the parties.
16.5. Choice of Law. This Agreement is governed by the laws of [CHOICE OF LAW STATE], without regard to any conflict of law principles.
16.6. Force Majeure. Except with regard to payment obligations, either party shall be excused from delays in performing or from failing to perform its obligations under this Agreement to the extent the delays or failures result from causes beyond the reasonable control of the party.
16.7. No Waiver. The waiver or failure of either party to exercise any right provided in this agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled.
16.8. Severability. If any provision of this Agreement is invalid or unenforceable, the remainder of this Agreement will remain in full force and effect.
In Witness whereof, the parties have performed this Agreement as of the date first written above.
Customer: ______________________ Date: ______________________
Developer: ______________________ Date: ______________________
EXHIBIT A: Software Specifications, Developer’s Duties and Schedules
Here are our recommendations for every section of a simple software development agreement.
This is a primary clause in any software developer agreement. Developer’s obligations cover the technical aspect of the software project work and the development services performed in cooperation with your company.
Make sure that this kind of information is clear to you as a non-tech expert. Ask qualified experts only any questions about the software development process before you sign an agreement.
Here, your obligations and rights are detailed in the software project development.
For example, you can specify whether you personally will monitor the product development at each phase or will delegate this task to the developer, vendor, or the IT team lead. Or you can state that all fees will be paid on time according to terms of the agreement, legal documents will be prepared properly, and spell out the legal rights of both parties and how they will be enforced.
Depending on the nature and complexity of your software developer agreement, you should set the general time frame for the whole project, plus delivery dates for each production phase and necessary costs and fees.
But if you have engaged in a long-term software project, you may leave your budget flexible. Your software development production process should still encompass independent stages for which you can set specific timelines, expenses, and responsible persons.
Allow for time to conduct testing when your product is fully developed. Its goal is to spot any technical bugs and fix them as soon as possible. If testing fails, the project can be rolled back to the previous development stage to make vital changes to the software.
To correctly compose this section, you need to answer the next questions:
The termination clause can help both parties stick to the agreement and avoid serious consequences.
The security and legal protection of your project data is crucial. In this section, you can specify the penalties for developers or vendors who violate the project’s confidentiality or misuse or disclose any data without your written authorization.
Also, specify the warranties of your vendors or developers. You can refer to the questions in the Termination section above.
Even if your software is not new, developers you hire still apply various techniques to improve the user experience and efficiency of a high-quality product. Therefore, their contribution to your “order” must be legally protected from third parties.
There are many cases when a third party claims that the developer you hired did not originate the improved software design but used a process owned by the third party. They may even sue you and your company for infringement of their intellectual property. You should consult with your intellectual property (IP) lawyer before and at the end of the software development process to ensure you and your own intellectual property rights are protected.
This optional clause is frequently included to provide for a period in which your staff can train with the new software product with the assistance of the developer. Any arrangement for either oversight or maintenance must be included in the agreement.
With this clause, vendors or IT professionals agree to provide you with all helpful materials, guidelines, or instructions to make the new software easy for you and your colleagues. You can specify which format of support you need and how long it should continue.
When the time for your developer’s cooperation is over, you will have a final product that you will enjoy using and which serves your partners and teammates well.
Simply download our printable example into Word or as a PDF which is fillable with your information.
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Frequently Asked Questions
Certainly, you can contact the creators of your software if you have questions or something minor needs improvement. However, if it’s serious and requires substantial time or labor to correct, then you will need to negotiate another software project enhancement deal or search for another developer team. The best practice is to anticipate this problem when negotiating your software development service agreement and building in terms to cover this situation.
If you seek a software application that does not require a lot of human resources and time for production, you can hire one person and sign a Time & Material Agreement or a Fixed-Cost Contract. The Fixed-Fee contract matches best when you know what kind of software you want, the Time and Material contract enables your freelancer to work in their own mode and suggest their own ideas to solve your issue.