When two or more businesses work together on a software development project, there needs to be an agreement in place so that everyone knows their responsibilities and expectations. This is known as a Software Development Agreement or SDA. In this article, we will discuss what is included in a Software Development Agreement, tips for creating one and provide a free sample template you can use.
What is a Software Development Agreement And Why Do You Need One
As the name suggests, a software development agreement template is a contract between you and a software developer. This document sets out the terms of your engagement, including what will be delivered, when it will be delivered, how much you will pay, and so on.
A well-drafted software development agreement template can save you a lot of time and money in the long run. It can help avoid disputes by setting out clear expectations from the outset. And if a dispute does arise, it can provide a roadmap for resolving it quickly and amicably.
Software Development Contract Types
There are two main types of software development agreements: fixed-price contracts and time and materials contracts.
Under a fixed-price contract, the developer agrees to deliver the project for a set price. This type of contract is best suited for projects with well-defined scope and requirements.
Time and materials contracts, on the other hand, allow for more flexibility. The developer charges you based on the number of hours worked and the cost of materials used. This type of contract is best suited for projects that are less defined or may require changes along the way.
The Components of a Software Development Agreement
Now that you know the types of development agreements, let’s take a look at the main components of a software development agreement. These are:
- Statement of work (SOW)
- Description of deliverables
- Payment terms
- Intellectual property rights (IPR)
Statement of work: The statement of work is a document that outlines the scope of the project, including objectives, milestones, and deliverables.
Description of deliverables: The description of deliverables outlines what the developer will deliver to you upon completion of the project. This may include things like source code, documentation, and user manuals.
Payment terms: The payment terms specify how and when you will pay the developer for their services. This may be a lump sum payment, milestone payment, or hourly payment.
Intellectual property rights (IPR): The IPR specifies who will own the intellectual property rights to the software that is developed. This is important to consider if you plan on selling or licensing the software in the future.
Tips for Creating Your Own SDA
Now that you know what a software development agreement template is and what components it should include, you may be wondering how to create your own. Here are a few tips:
- Make sure to specify the scope of work in detail. This will help avoid any misunderstandings down the road.
- Be clear about who will own the intellectual property rights to the software. This is an important consideration if you plan on selling or licensing the software in the future.
- Include payment terms that are clear and fair. You don’t want to end up in a dispute with your developer overpayment.
- Get everything in writing! A verbal agreement is not enough – make sure you have a signed contract before any work begins.
Sample SDA
This Software Development Agreement ("Agreement") is made and entered into as of [DATE], by and between [DEVELOPER], a [STATE] corporation with its principal place of business located at [ADDRESS] ("Developer"), and [CLIENT], a [STATE] corporation with its principal place of business located at[ADDRESS] ("Client"). For the purpose of this Agreement, the parties agree to enter into an arrangement whereby Developer will provide software development services to Client on the terms set forth herein.
In consideration of the promises and mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties agree as follows:
DEFINITIONS.
"Affiliate" means any entity that directly or indirectly controls, is controlled by, or is under common control with the subject entity. "Control," for purposes of this definition, means direct or indirect ownership or control of more than 50% of the voting interests of the subject entity.
"Agreement" means this software development agreement and all exhibits and attachments hereto.
"Confidential Information" means all information or material that has or could have commercial value or other utility in the business in which Disclosing Party is engaged. If Confidential Information is in written form, the Disclosing Party shall label or stamp the materials with the word "Confidential" or some similar warning. If Confidential Information is transmitted orally, the Disclosing Party shall promptly provide writing indicating that such oral communication constituted Confidential Information.
"Disclosing Party" means the party disclosing or offering to disclose Confidential Information under this Agreement.
"Intellectual Property Rights" means all patent rights, copyright rights, mask work rights, moral rights, rights of publicity, trademark, trade dress and service mark rights, goodwill, trade secret rights and other intellectual property rights as may now exist or hereafter come into existence and which may be owned by or licensed to a party.
"Party" means Disclosing Party or Receiving Party.
"Receiving Party" means the party receiving Confidential Information from Disclosing Party under this Agreement.
"Use" means use, practice or otherwise exploit.
This Agreement and the relationship between the parties shall be governed by the laws of [Country] without regard to its conflict of law provisions.
The Disclosing Party has disclosed or made available to the Receiving Party certain Confidential Information concerning Disclosing Party's business (the "Confidential Information"). The Confidential Information includes without limitation: (i) trade secrets; (ii) inventions (whether patentable or not); (iii) technology; (iv) processes; (v) formulas; ix) patterns; xi)(xii) designs; xiii)(xiv) prototypes; xv)(xvi) source code; xvii)(xviii) object code; (xix) computer programs; (xx) know-how and technical data; and (xxi) business and financial information. The Disclosing Party wishes to restrict the use of its Confidential Information by the Receiving Party so that such Confidential Information will not be used, copied or otherwise disseminated without the Disclosing Party's prior written consent.
In order to protect the confidentiality of the Confidential Information, the parties agree to enter into this non-disclosure agreement ("Agreement") with respect to such Confidential Information.
The term of this Agreement shall begin on the date of execution by both parties and shall terminate two (or as otherwise stated in writing by the Disclosing Party) years from the date of disclosure of the Confidential Information to the Receiving Party.
This Agreement shall bind the parties and their respective successors and assigns.
Each party has read this Agreement prior to its execution and has had an opportunity to consult with legal counsel of its choice. This Agreement shall be binding upon each party hereto and its respective successors, heirs, administrators, executors and assigns. This Agreement sets forth the entire understanding between the parties hereto concerning the subject matter hereof and supersedes all prior agreements or understandings between them concerning such subject matter. Any changes or modifications to this Agreement must be in writing signed by both parties. If any provision in this Agreement is found invalid or unenforceable, that provision shall be interpreted in a manner consistent with applicable law to reflect, as nearly as possible, the original intentions of the parties and all other provisions of this Agreement shall remain in full force and effect. This Agreement may not be assigned by either party without the prior written consent of the other party; however, each party may assign this Agreement in connection with a merger or acquisition. Waiver of any term hereof shall only be effective if in writing signed by both parties. The headings used herein are for reference purposes only and do not form part of this Agreement. Any claim relating to this Agreement must be brought within one year after the cause of action arises, or such claim will be barred.
This Agreement has been duly executed as of the Effective Date.
COMPANY
______________________________
Signature: ____________________________
Typed or Printed Name: ___________________ Title: _______________________________Date: _______________
FAQs About Software Development Agreements
What is a software development agreement?
A software development agreement is a legally binding contract between two parties that outlines the terms and conditions of a project.
What are the main components of a software development agreement?
There are several key components that should be included in a software development agreement, including:
- A clear description of the project scope and objectives
- The roles and responsibilities of each party
- The schedule and timeline for the project
- The budget and payment terms
- The intellectual property rights for the software developed
- The confidentiality provisions
- The termination clause
What are the three main types of software contracts?
- Fixed price contract: In this type of agreement, the total price for the project is agreed upon upfront and does not change, regardless of any unforeseen circumstances that may arise.
- Time and materials contract: In this type of agreement, the buyer agrees to pay for all the materials used in the project, as well as the developer’s hourly rate. This type of contract is more flexible than a fixed-price contract, as it allows for unforeseen circumstances.
- Cost-plus contract: In this type of agreement, the buyer agrees to pay for all the materials used in the project, as well as a percentage of the total project cost. This type of contract is more flexible than a fixed-price contract, as it allows for unforeseen circumstances.