Advice for Using a Software Development Contract Template

In today’s electronic age it is almost possible to operate a successful business without computers that utilize the right software. Often, that requires you to enter into a contract with a software developer to create software specifically tailored to meet the needs of your business. Our software development contract template allows you to customize your contract to reflect the terms of the agreement between the parties.

Important Considerations for Your Software Development Contract

Below We’ll Cover:

• Important Details to Include in Your Software Development Contract
• Mistakes to Avoid
• Links to Additional Resources
• How to Get Your Contract Signed

Important Details to Include in Your Software Development Contract

Although there are a seemingly endless number of existing software programs available for purchase or use, it can be advantageous for any business to use software uniquely tailored to the operation of the business. Given the highly technical nature of software development, it is crucial that the contract you sign accurately reflects the agreement made between the parties. Creating a contract that covers all aspects of your agreement in unambiguous and succinct terms goes a long way toward preventing a dispute as well as protecting you if a dispute does occur.

When creating your software development contract, be sure to include the following details:

• Contact information for both parties
• Definitions of technical terms
• Detailed scope of services contracted
• Personnel
• Acceptance terms
• Ownership and copyright rights
• Covenants
• Fees and payment
• Representations and warranties
• Terminations
• Indemnification clause
• Confidentiality clause
• Arbitration clause
• Insurance
• Choice of law/jurisdiction
• Non-competition clause

Mistakes to Avoid in Your Software Development Contract

The goal of creating a software development contract is to ensure that the expectations of both parties clear to decrease the likelihood of a legal dispute. To increase the odds of your achieving that goal, the following mistakes should be avoided when customizing your contract:

• Insufficient detail in the job description. The nature of a software development agreement requires you to include as much detail as possible to ensure that the finished product works as intended.
• Failing to be clear regarding personnel. If there is a specific developer or group of developers that you want working on the software, be sure to make that clear.
• Vague or missing terms of acceptance. Unlike tangible products, the value of a software program cannot be judged until it is installed and tested. Be sure to include terms that allow for reasonable testing and that dictates what the parties are to do if the software does not work as intended.
• Leaving ownership or intellectual property rights unclear. If you are to own all rights to the finished work product, it is imperative that the terms of the contract reflect that agreement. The same applies to any intellectual property rights.
• Failing to include a “harmful code” clause. To ensure that the software developer cannot access, disable, or otherwise damage the software or your business once it is installed, be sure to include a covenant that includes a “harmful code” clause.
• Leaving the fee open-ended. Agreeing to an hourly fee is not unusual; however, it is best to include a fee structure that limits the total hours or that requires certain benchmarks to be reached before payments are made. It is also important to address additional or unforeseen costs and specify who will cover those costs.
• Failing to require a warranty. Make it clear that the software developer owns all rights to the software to ensure that you are receiving ownership of the software free and clear and that it will perform according to the required specifications for a reasonable period of time.
• Missing or incomplete termination clause. Under what conditions can either party terminate the contract? If the contract is terminated by a party, what happens to the software and what fees are owed to which party?
• Failure to indemnify. If a legal dispute involving a third party arises over ownership of the software, it should be clear that the developer will indemnify the purchaser.
• Forgetting the confidential nature of the contract. To create a software program for a business the developer will likely be privy to confidential information. Be sure to address that in the contract.
• Employment and insurance requirements. It should be clear that the software developer is an independent contractor. As such, the developer should be legally responsible for obtaining unemployment, workers’ compensation, and liability insurance that covers anyone working on the project.
• Allowing competition. Non-competition clauses are reasonable requirements in a contract of this nature; however, they are frequently omitted, allowing a software developer to develop similar software for a competitor.
• Omitting jurisdictional language. There is a good chance that the parties are not physically located in the same state. If so, be sure to decide ahead of time which state will have jurisdiction if the need for litigation arises.

Links to Additional Resources

• Software Development Contract: Types and Main Points to Include
• Software and Application Development Agreements: Protect Your Copyright
• What Is a Software Development Agreement?

How to Get Your Contract Signed

Proper execution of any contract is crucial to ensuring that the terms agreed upon in the contract will hold up in court should a dispute arise. In today’s digital world, the ability to have your contract signed electronically is imperative. Once you have customized your software development contract to reflect the agreement reached between you and your client, sending it to your client for a signature is easy and quick with Nitro. Start your Nitro free trial today .