‘Business moves fast and legal paperwork will slow things down’…. That’s a rather common worry for businesses engaging a developer to build a much needed software program to enhance internal business processes, improve customer facing processes or sometimes both.
And when you’re dealing with a developer that has been recommended to you, or whom you feel confident will treat you fairly, why worry about a contract? ‘After all, most disagreements can be resolved commercially, right?’ All this is true to an extent. But in addition to providing you with legal protection, putting an evenly-balanced and concise agreement in place with your developer actually helps to ensure a smooth working relationship and reduces the risk of future disagreements.
Software agreements can cover development, hosting, maintenance and support arrangements. If both parties are reasonable and have clear expectations, software agreements do not take long to be agreed.
There are certainly some provisions which should be included in the agreement purely from a legal perspective. For example, did you know that the software developer, and not the business owner, owns the copyright in software code and certain other deliverables unless the contract states otherwise? Lawyers often are asked to review software agreements to make sure the transfer of IP ownership to the business owner (the "assignment") is drafted correctly. You should also make sure that the supplier’s liability limit is commercially reasonable, and that the contract includes appropriate warranties around the product/service to be delivered.
It’s also important to include less ‘legal’ concepts that describe the nuts and bolts of the relationship. For example, the parties should agree on a clear specification of work, and ensure that the payment schedule is tied to acceptance of each relevant phase of work (after successful customer testing). Both sides should also understand the delivery timescale, and include a simple change control process to allow for scope and fee change to be controlled. Well drafted contracts also often include provisions that clarify who is responsible for procuring and configuring any third party hardware of software that is required.
So really the written agreement is just as much about setting expectations on both sides around key commercial, practical and technical issues as it is about the ‘legals’. The cost of getting this right and signing a pragmatic agreement that covers off these areas of concern is likely to be negligible compared to the software build cost – or the cost of potential disagreements arising from a poorly drafted contract!
At Thomson Snell & Passmore, Intellectual Property and Technology lawyers Gina Bicknell and Stuart Smith specialise in advising businesses that buy or sell IT systems and services. They would be delighted to have an initial chat to explore how they can help you manage your legal relations with customers or suppliers.