A software development agreement is a contract between a developer and a client. The developer commits to building a software application for the client under established and agreed terms.
Before working on any software development project, it’s vital to have a clear and legally binding agreement in writing.
A software development agreement protects both you and your clients. It’s how you define your role on the job so that clients can be clear about their expectations.
In this article, we’ll run through the basics of drafting a software development agreement. We’ll cover:
Please note that, as with any legal document, your agreement should be reviewed by an experienced attorney.
Why is a Software Development Agreement Important?
Drafting a software development contract may seem like an undesirable chore. However, you must have one with your clients.
First, a software development agreement prevents scope creep. The contract will clearly state the project’s requirements and explain the process of handling scope adjustments. As a result, clients will be more careful about asking for additional features or changes to the project scope after it has already begun.
Also, a software development contract provides legal protection for your intellectual rights as a developer. With the software contract, you can determine the extent to which your client has rights over the licenses and resources you use for their project.
Finally, a study shows that developers can be liable for software damages due to their negligence. The study also reveals that without a defined contract, clients can make outrageous claims for damages developers were not responsible for.
Careful contract drafting can help you determine the limits of liability you’ll bear as a developer. This is mutually beneficial because it keeps you diligent on the clients’ projects and helps you be more intentional about avoiding costly mistakes. It’ll also protect you from any extreme claims clients may bring up in the future.
How to Draft a Software Development Agreement
Software development projects vary in scope and technicality. Therefore, even if you have software design documents in place, you also need a software development contract to define the project, state expectations, payment terms, and other legal issues involved.
Now, let’s look at what should be in your software development agreement.
1. Specify the Duties of the Developer
Your software development service agreement should specify your duties as a developer. Your duties may vary depending on your client’s project needs.
However, ensure that you are specific about the professional services you will provide. Ideally, the project’s specifications would be provided so you’ll be clear about your duties.
Here is a software development contract template showing how this could look like:
As seen in the example above, you should indicate the following:
- That you’ll deliver the software according to the specifications provided.
- The extent of work you’ll deliver based on established milestones.
- Your availability to provide support and maintenance services when needed within the project’s lifecycle.
You can also mention areas where your client may need to provide assistance or support to help you perform your tasks effectively.
2. Software Delivery Date
The software delivery date is the scheduled date you’re supposed to deliver the complete software package. This date depends on the project scope, development process, and final deadline.
You need to accurately determine the project needs and the production time frame because failure to do this may lead to a wrong project time estimate. To achieve this, ensure that you have a detailed discussion with the client about the project’s needs before drafting the contract.
Software development platforms like Tara AI can also prove very helpful here. Tara can help you estimate the effort required to complete tasks.
It uses data from your last three sprints to calculate your team’s velocity and accurately predict how much effort (in story points or hours) it would take to complete project tasks.
These smart predictions can help you deliver an accurate delivery date to clients.
3. Ownership of Intellectual Property
As a developer, certain rights like software patents, trademarks, and copyright should be transferred to the client. These rights are classified as “Works made for Hire,” which is applicable when:
- The developer creates the software as part of their duties to a company.
- The software program is made based on the client’s custom specifications and directions.
According to the United States Copyright Office, “when a work is made for hire, the hiring or commissioning party is considered the author and the copyright owner.”
If your client still wants ownership rights over any property that does not fall under “Work Made for Hire,” you can add a clause that indicates this in your agreement. See this example from a template by Priori Legal.
You should also indicate if you’ll help the client in obtaining copyright and legal protection for the software when it becomes necessary.
4. Maintain Confidentiality
You must build trust with your clients. This will give you a good reputation and encourage the client to work with you in the future.
The confidentiality section is where you assure clients that you’ll not disclose their trade secrets or any details of the software to a third party. Here’s a good example:
As seen above, you should indicate that you’ll not make copies of your client’s confidential information or any content specific to their software for personal use or distribution.
If you need to use your work for marketing purposes, it should be with your client’s consent. Additionally, the information you share should not negatively affect your client’s competitive advantage.
5. Service Charge
Service charge helps your clients establish their financial commitments, especially if they have a definite budget. Typically, you should be aware of your client’s budget before defining your service charge.
Also, your client should be willing to reimburse any out-of-pocket expenses that you may incur on their behalf while working on your project. It’s always best to avoid scenarios like this. However, when such expenses are inevitable, you can add a clause like the one below.
While you should avoid putting a strain on your client’s capacity, you must also accurately quantify the amount of work you’ll be doing. Be specific about how you want clients to pay. Is it an hourly rate? Or is it a one-off payment? Also, indicate when you’ll send an invoice and how often this will be.
6. Specification Change Request
While clients might make reasonable efforts to avoid scope creep, sometimes, it’s unavoidable, so they’ll need you to make some changes. In light of this, you should define how these changes should be requested and how the request will be addressed.
For instance, how long will it take you to evaluate the client’s request and give feedback? How will this feedback be sent?
As seen in the above template, a change request may cause a delay in the project’s timeline or attract additional costs. Don’t hesitate to indicate this in your software agreement so that the client knows beforehand.
7. No Modification Clause
Sticking to your contract terms is very important. The modification clause states that “no modification shall be made” to the agreement unless both parties (you and the client) have reached an agreement. Any agreed changes must be in writing.
A “no modification clause” prevents any form of material breach, protects your contractual relationship, and ensures that your clients will follow due process in case they want to introduce any changes.
8. Warranty of the Software
The software warranty curbs any risks or damages due to negligence. They protect your client from any loss or damage to or from the software.
Here, you also guarantee the client that the software’s development does not violate any agreement you have with another client. See the example below:
Also, indicate that the software does not violate the intellectual property rights of another party. Assure your client that you’ll provide a stable, functional, and secure software product. Tell them what to do if any issues arise with the software within a specific period.
Software development is not a project you handle without due diligence. A legal agreement is crucial because it establishes clear terms and conditions for the project.
A software development agreement prevents unnecessary scope creep and protects you from any legal liabilities that may arise from a client’s extreme claims.
When drafting your software project agreement, you need to be specific about your duties, the software delivery date, intellectual property ownership, and confidentiality of your client’s information.
You should also state the service charge structure and procedures for changing software specifications. Include a “no modification clause” to keep the formality of your contract intact.
Finally, ensure that there is a warranty that the software won’t violate other any intellectual properties of other parties.
Now that you have these details, you can proceed to create a balanced software development agreement that governs your contracts.
With the agreement set, it’s now time to embark on the development process. If you’d like an intuitive zero-config platform to handle all your software requirements, plan sprints, and track your software development progress, check out Tara AI. Here’s how Tara works.