How to frame a software development agreement

Software development is often a complex technical project which also gives rise to many legal issues, writes Sue Mann, commercial solicitor for Cousins Business Law. We have heard of examples of software development projects where things have gone wrong and the resulting dispute has ended up in court. In fact, IT projects have figured in a considerable number of cases in recent years – some involving both small contractors and large companies or organisations alike.

When a project has been agreed in principle, the temptation can be to get on with the work as soon as possible, particularly where it is contract or urgent. But it is worth the software developer taking the time and trouble to put a proper software development agreement in place, because a well drawn up SDA can go a long way towards reducing the risks.

A software development agreement should:

• Define the scope of the software development to be carried out
• Identify the responsibilities of both client and developer in relation to the project
• Manage the expectations of the client
• Identify and manage risks and liability             

There are certain issues that a software developer should cover in the SDA including:

1. A precise specification of the software to be developed identifying the functions it is expected to perform
2. A plan as to how the software development is to be implemented setting out the development stages and timescales or targets
3. The obligations of not only the developer, but also the client in relation to the project
4. A change control procedure
5. A procedure for acceptance of the software
6. Details of the pricing of the work and when payments are to be made
7. Limitation of the developer’s liability
8. Rights in the software

These points only indicate some of the main issues to be addressed in relation to software development agreements. It is important for software developers to consider these carefully and get a suitable agreement before the work commences to avoid problems arising in relation to the project, which they themselves could be liable for.