Software Development Agreement

Sample (Text Version)

This Software Development Agreement (“Agreement”) is made and effective [DATE], by
and between [NAME] (“Developer”) and [NAME] (“Customer”).

1. Definitions

1.1. “Confidential Information” shall mean all material and information supplied by
Customer that has or will come into Developer’s possession or knowledge of Developer
in connection with its performance hereunder. Confidential information does not include
information that:

(a) is or becomes public knowledge through no fault of Developer;

(b) Developer knew before Customer disclosed it;

(c) Developer obtains from sources other than Customer who owe no duty of
confidentiality to Customer; or

(d) Developer autonomously designs.

1.2. “Developer’s Duties” shall mean a listing of all items to be delivered to Customer
under this Agreement.

1.3. “Developer’s Duties” shall mean a work that is based on any preexisting works,
such as a revision, modification, translation, abridgement, condensation, expansion, or
any other form in which such preexisting works may be recast, transformed, or adapted,
and that, if prepared without authorization of the owner of the copyright in such pre
existing work, would constitute a copyright infringement under the United States
Copyright Act.
1.4. “Source License Agreement” means the terms under which Software is licensed in
source code form to the general public for use without charge, including without
limitation any license agreement that

(a) conditions the use or distribution of any Software program that incorporates such
Software on the disclosure, licensing or distribution of the source code of such program
(including such Software) and

(b) otherwise materially limits a licensee’s freedom of action with regard to seeking
compensation in connection with licensing or distributing such program or Software in
object code form, including without limitation the GNU General Public License or the
GNU Lesser General Public License.

1.5. “Software” means Software licensed pursuant to the terms of an Open Source
License Agreement.

1.6. “Schedule” shall mean the delivery dates for each Developer’s Duty.

1.7. “Specifications” shall mean the specifications for the Software as directed by
Customer, together with any modifications that may be agreed to in writing by the
parties during the term of this Agreement.

2. Main Responsibilities

2.1. Specifications. Customer shall specify the Specifications, Developer’s Duties, and

Schedules [with input from Developer].

2.2. Development. Developer shall design, develop, and implement the Software in

accordance with the Specifications, Developer’s Duties, and Schedule.

2.3. Training.

(a) Training Frame. Developer shall provide Customer with [HOURS] of training OR

such training as may reasonably be requested by Customer on the use of the Software.
(b) Training Dates and Locations. The training will be conducted on such dates and
locations as the parties may agree.

2.4. Maintenance. Developer shall perform remedial and preventive maintenance for

the Software after its acceptance so that the Software continues to perform in
accordance with the technical design. Customer and Developer shall negotiate the
terms and price of such maintenance services, but Developer shall not charge
Customer more than [MAXIMUM AMOUNT] per year for the first two years of
maintenance services after acceptance of the Software. Customer shall have the right
to terminate such maintenance services at any time upon thirty (30) days written notice
to Developer. Developer shall have the right to terminate such maintenance services
upon thirty (30) days written notice to Customer if Customer is in material breach of the
maintenance agreement between Customer and Developer and remains in material
breach for such thirty (30) days.

3. Delivery and Acceptance

3.1. Acceptance Period. Customer will have [TIME PERIOD] following the date of

[delivery OR launchment] to assess and test the Software.

3.2. Completion. If Developer delivers the Software in accordance with the

Specifications, Deliverables, or Schedule, then Developer shall be deemed to have
completed its delivery obligations.

3.3. Rejection. If Developer fails to deliver the Software in accordance with the

Specifications, Developer’s Duties, or Schedule, then:

(a) Notification. Customer shall detail in writing its grounds for rejection; and

(b) Rectification. Developer shall [immediately OR use its best efforts to] correct the
Software and upon delivery of such correction, the process of acceptance, completion,
and rejection shall restart.
(c) Continued Failure. If the Developer’s corrections fails to deliver the Software in
accordance with the Specifications, Developer’s Duties, or Schedule, then Customer
may elect to:

(i) terminate the agreement, or

(ii) adjust the Specifications, Developer’s Duties, or Schedule.

4. Changes

4.1. Change Orders. Customer may request changes to the Specifications,

Developer’s Duties, or Schedules.

4.2. Additional Time or Expense. If the suggested change will, in the reasonable

opinion of Developer, require a delay in delivery of the Software or would result in
additional expense, then:

(a) Customer and Developer shall confer; and

(b) Customer may choose to either:

(i) cancel its suggested change, or

(ii) require Developer to deliver the Software with the suggested change, subject to the
delay and/or additional expense.

If Developer cannot or chooses not to accept the change order, then Customer may
elect to terminate the agreement.

5. Payment.

5.1. Development Costs. Customer shall pay Developer:

(a) $ [INITIAL AMOUNT] down payment; and

(b) $ [FINAL AMOUNT] upon delivery according to the Specification OR Acceptance.

5.2. Costs. [Subject to Customer’s prior approval] Customer will reimburse Developer

for all reasonable expenses incurred by Developer during the development of the
Software.

5.3. Training Costs. The training shall be provided at the rate of [TRAINING COST

RATE].

6. Ownership of Software. Developer agrees that the development of the Software is

“work for hire” within the meaning of the Copyright Act of 1976, as amended from time
to time, and that the Software shall be the sole property of Customer. Developer
assigns to Customer its entire right, title and interest in anything created or developed
by Developer for Customer under this Agreement (“Product”) including all patents,
copyrights, trade secrets and other proprietary rights. This assignment is conditioned
upon full payment of the compensation due Developer under this Agreement.

7. Term. This Agreement shall commence upon [DATE] and continue until all of the
obligations of the parties have been performed or until earlier terminated as provided
herein.

8. Representations

8.1. No Infringement. Developer represents and warrants that the Software will not
infringe any patent, copyright, trademark, trade secret or other proprietary right of any
person.

8.2. No Third Party Property. Developer represents and warrants that it will not use
any trade secrets or confidential or proprietary information owned by any third party in
developing the Software.
8.3. No Obligation. Developer represents and warrants that neither Developer nor any
other company or individual performing services pursuant to this Agreement is under
any obligation to assign or give any work done under this Agreement to any third party.

8.4. No Open Source. Developer warrants that the Software does not contain any
other Software.

9. Warranties

9.1. Performance. Developer warrants that for a period of [TIME PERIOD], the

Software will operate substantially according to the Specifications.

9.2. Repair or Replace. Developer will repair or replace the System during such [TIME
PERIOD] as soon as possible after Customer informs Developer of any breach of this
warranty.

9.3. Exclusions. This warranty excludes any claims based on defects in the Software

caused by Customer, other parties beyond the control of Developer, or the hardware.

9.4. No Other Warranties. There are no express or implied warranties, including the

implied warranties of merchantability and fitness for a particular purpose, respecting this
Agreement, the Software or Services.

10. Acknowledgement-Relationship of the Parties

10.1. Independent Contractor. Developer is an independent contractor and is not an

employee or agent of Customer.

10.2. No Partnership. Nothing in this Agreement creates a partnership or joint venture

between the parties.

11. Escrow of Source Code

11.1. Delivery of Object Code. Customer agrees that the Software developed under
this Agreement shall be delivered to Customer in object code form only.

11.2. Escrow of Source Code. Developer agrees that one copy of the source code
version of the Software and associated documentation shall be deposited with an
escrow agent specializing in software escrows to be mutually agreed upon in writing by
Developer and Customer after good faith negotiation.

11.3. Delivery and Update of Source Code. The source code shall be delivered to the
escrow agent within [NUMBER OF DAYS] days after delivery of the object code to
Customer. Thereafter, the source code version of all updates, enhancements and
modifications of the Software created by Developer on Customer’s behalf, as well as
associated documentation, shall be deposited by Developer with the escrow agent.
Customer shall pay all fees necessary to establish and maintain the escrow.

11.4. Contingent License. Developer hereby grants to Customer a contingent license

to receive the source code from the escrow agent and to use the source code to
support its use of the Software in machine-readable form if one or more of the following
conditions occurs:

(a) Developer, whether directly or through a successor or affiliate, ceases to be in the

software business.

(b) Developer fails to fulfill its obligations to maintain the Software as provided in this
Agreement.

(c) Developer becomes insolvent or admits insolvency or a general inability to pay its
debts as they become due.

(d) Developer files a petition for protection under the U.S. Bankruptcy Code, or an
involuntary petition is filed against it and is not dismissed within 60 days.

12. Confidentiality. During the term of this Agreement and for [TIME PERIOD]

afterward, Developer will keep the Confidential Information private and secure.
13. Indemnification. If any third party brings a lawsuit or proceeding against Customer
based upon a claim that the Software breaches the third party’s patent, copyright or
trade secrets rights, and it is determined that such infringement has occurred, then
Developer shall hold Customer harmless against any loss, damage, expense or cost,
including reasonable attorney fees, arising from the claim.

14. Limitation of Liability. Neither party shall be liable for any special, indirect,

incidental or consequential damages (including damages for loss of business, profits or
any other loss) incurred or suffered in connection with the Software.

15. Terminations.

15.1. Termination for Cause. This Agreement may be terminated by either party upon

written notice to the other, if:

(a) the other party breaches any material obligation; and

(b) the breaching party fails to cure such breach within [TIME PERIOD] of receipt of the
notice.

15.2. Effect of Termination

(a) Payment of Outstanding Fees. Customer shall pay Developer for all services

rendered and work performed up to the date of termination.

(b) Return or Destruction. Within [TIME PERIOD] after the termination or expiration of

this Agreement, Developer shall return, or at the option of Customer, Developer shall
destroy all copies of Confidential Information and shall deliver written certification by an
officer of Customer that Customer has complied with these requirements.

16. General Provisions.

16.1. Dispute Resolution. Any controversy or claim arising out of or relating to this

contract shall be settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction.

16.2. Notices. Any notice required by this Agreement or given in connection with it,

shall be in writing and shall be given to the appropriate party by personal delivery or a
recognized overnight delivery service such as FedEx.

If to Developer: [DEVELOPER ADDRESS]

If to Customer: [CUSTOMER ADDRESS]

16.3. Entire Agreement. This Agreement contains the entire agreement between the

parties and supersedes all understandings and agreements whether written or oral.

16.4. Amendment. No amendment or modification of this Agreement is valid unless in

writing, signed by the parties.

16.5. Choice of Law. This Agreement is governed by the laws of [CHOICE OF LAW

STATE], without regard to any conflict of law principles.

16.6. Force Majeure. Except with regard to payment obligations, either party shall be

excused from delays in performing or from failing to perform its obligations under this
Agreement to the extent the delays or failures result from causes beyond the
reasonable control of the party.

16.7. No Waiver. The waiver or failure of either party to exercise any right provided in
this agreement shall not be deemed a waiver of any other right or remedy to which the
party may be entitled.

16.8. Severability. If any provision of this Agreement is invalid or unenforceable, the

remainder of this Agreement will remain in full force and effect.

In Witness whereof, the parties have performed this Agreement as of the date first
written above.
Customer: ______________________ Date: ______________________

Developer: ______________________ Date: ______________________

EXHIBIT A: Software Specifications, Developer’s Duties and Schedules