25 Jun

Introduction / What is Software Development? / Development Agreement / Parties / Commencement and Duration /    Deliverables / Intellectual Property Rights (IPRs) / Pricing, Fees, and Expenses / Other Standard Legal Terms and Conditions / Conclusion

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Software development is a complex process that involves designing, coding, testing, and maintaining computer programs or applications. This article explores what software development entails and discuss the key considerations that should be included in a development agreement to ensure a successful collaboration between parties.  

What is Software Development?

Software development refers to the process of creating computer programs or applications that perform specific tasks or functions. 

It involves a series of steps, including requirements gathering, design, coding, testing, and deployment. 

Software developers use programming languages, frameworks, and tools to build applications that meet the needs of businesses or end-users. 

Development Agreement

The following are some of the key considerations for a software development agreement. 

1. Parties:

  • The parties must be identified as well as their legal status. 
  • Determine if any third parties, such as group affiliates, will benefit from the agreement. 
  • Consider whether any third party will guarantee performance or financial obligations.  

2. Commencement and Duration:

  • Establish the proposed commencement or effective date of the agreement. 
  • Determine if there are any preconditions that must be satisfied before the agreement can take effect. 
  • Clarify the nature of any early termination rights, such as termination for cause or termination for convenience.  

3. Deliverables:

  • The customer must clearly identify its requirements for the software to be developed. 
  • Determine whether technical or functional specifications exist and establish the obligations and timeframe for their creation. 
  • Identify the software to be developed, including any supporting user documentation and services to be provided by the supplier. 
  • Establish performance warranties and service levels, including the duration and agreement process. 
  • Ascertain whether the use of open-source code is proposed and understand the implications. 
  • Determine who will conduct acceptance testing and establish the consequences of software failure. 
  • Identify deductions, credits, termination, or other remedies for breach of service levels and obligations. Identify any key personnel required for the development project.  

4. Intellectual Property Rights (IPRs):

  • Identify the relevant IPRs in the software to be developed, distinguishing between current software and future developments. 
  • Determine whether IPRs in the software will be transferred or if the supplier will retain core IPRs for use in other products. 
  • Clarify the format of software delivery, such as object or source code form or hosting. Consider whether licenses of IPRs will be exclusive to prevent licensing to competitors.  

5. Pricing, Fees, and Expenses:

  • Confirm the fee structure for software development and whether payment is linked to project milestones. 
  • Determine which party will pay ancillary costs, such as equipment or delivery. 
  • Clarify whether payments are exclusive of VAT and taxes. 
  • Establish whether the price is subject to variation and specify the frequency and calculation method. 
  • Confirm payment terms, invoicing process, and remedies for late payment.  

6. Other Standard Legal Terms and Conditions:

  • Determine when title and risk in the developed software will pass and when it will be deemed delivered, installed, or accepted.  
  • Identify exclusions and limitations on liability, liability caps, and any types of loss for which a party has unlimited liability. 
  • Consider termination provisions, including notice, breach, insolvency, or change of control.  
  • Establish post-termination obligations, such as returning confidential information or handing over existing software. 
  • Confirm general warranties and indemnities.  
  • Identify specific obligations relating to confidentiality and publicity, including their duration.  
  • Determine the dispute resolution process, such as internal resolution, expert determination, mediation, arbitration, or courts.  Specify the governing law and jurisdiction of the agreement.  
  • Consider including relevant boilerplate provisions, such as escrow arrangements, non-solicitation, rights of third parties, entire agreement, anti-bribery, force majeure, insurance, data protection, notice, severability, compliance with law, assignment and subcontracting, variation, change control, reporting, audits and investigations, waiver, set-off.  
  • Clarify how the agreement will be signed or executed, including counterparts, electronic signing, and further assurance clause.  


Software development is a crucial process that requires careful consideration and planning and it's important to consider a wide range of issues when preparing a development agreement.

A Software Development Checklist can be found on our Guides page.

A Software Development Agreement can be found on our Templates page.

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Note: This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only.

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