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05 Software Contracts (Part-I)

The document discusses topics related to software contracts including the need for formal contracts, general contractual issues, sections that should be included in software contracts, deliverables, intellectual property rights, licensing agreements, confidentiality agreements, payment terms, penalty clauses, and indemnity.

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abdullahmaliktg
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26 views17 pages

05 Software Contracts (Part-I)

The document discusses topics related to software contracts including the need for formal contracts, general contractual issues, sections that should be included in software contracts, deliverables, intellectual property rights, licensing agreements, confidentiality agreements, payment terms, penalty clauses, and indemnity.

Uploaded by

abdullahmaliktg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 17

Week # 04

Software Contracts

1
Do we need a formal Contract?

• Most disputes which end up in courts are caused by lack


of clarity as to what each party expected from the other

• If a dispute has to be resolved in the courts, this will


involve lawyers, accountants, judges, etc. trying to work
out each party’s obligations

2
Who needs lawyers anyway?

• Optimists are the best deal makers


• Pessimists are the best contracts writers
• Lawyers are born pessimists (when they draft
contracts…)
Reference: Hilary Pearson, Computer Contracts

3
General Contractual Issues

• Pre-Contractual obligations
• Confidentiality agreements
• Invitation to Tender
• Offer and Acceptance
• Consideration
• Unfair Contracts Terms
• No doubts or ambiguity
• Local legislation

4
Software Contracts

• Agreement between the parties


• Profitable in nature
• Governed by the standard Law of Contracts
• Specific problems relating to e-commerce
• Digital signature
• Which law governs the agreement

5
Software Contracts

Sections Includes:
1. Name of Parties
2. Standard Terms and Conditions
3. Set of Appendices (Annexes)
• Specific documents

6
Standard Terms & Conditions

Standard Terms
& Conditions
(STC)
Appendix
(Annex)

Specific
Documents
e.g. Specifications

7
Section – I of contract

The Object of the Contract

•Introductory paragraphs of parties.


•What is to be produced?
•Contract should also provide
• Framework for variations to original specifications
• Method of calculation of additional payment
• Framework for other changes
(e.g. acceptance testing, delivery schedule)

8
Section – II of contract
Deliverables by developers
• Source code
• Command files
(for building and installing the executable code)
• Documentation
• Manuals (Reference, Training, Operations)
• Software tools to help maintain the code
• User training (on site / off site)
• Training for client’s maintenance staff
• Test data and test results

9
Section – II of contract

Obligations of the Client

• Information on Client activities/setup


• Information on software environment
• Access to staff
• Facilities for development and testing
• Facilities for software company staff on client
premises
• Attendance at progress meetings

10
Section – II of contract

IPR and other rights

• Who owns the rights to what


• Books, documents, disks
• Intellectual Property Rights
• Author of the software
• Software House
• Client (upon payment)
• Written agreement (assignment of rights)
• Sale or Licence …

11
Section – II of contract

Licensing Agreement

•Exclusive Licence (expensive)


• Software house retains copyright
• Software house can’t re-use the code

•Non-Exclusive Licence (cheaper)


• Software house retains copyright
• Software house can re-use the code
• Client may acquire right to veto grant of licence
to others (competitors)
12
Section – II of contract

Licensing Agreement (Cont….)

•Matters to consider
• Duration of licence (termination)
• Right to assign (transfer) licence to others
• Scope of licence
• One or more computers
• One or more sites
• Confidentiality
Client is prevented from allowing others to become familiar with
the software
Confidentiality agreements….. On next slide

13
Section – II of contract

Confidentiality Agreement

• Confidentiality of Client business


• Confidentiality of the software and the properties
of the system
Applicable at different stages:
• Pre-Contractual stage
• Whilst software is being developed
• After delivery

14
Section – II of contract

Payment terms

Issues to be considered:
• Staged payment
• Milestones
• Delays and changes (attributable to Client)
•Calculating the cost
• Changes to delivery schedule
• Changes to performance

15
Section – II of contract

Penalty Clauses

Delays caused by the Supplier


• Contract may provide for a fixed penalty payment
for each week/month delay in delivering the
software

• Not very common


• Suppliers are unwilling to agree
• Will be taken into account in calculating the cost
• Suppliers have every reason to deliver as soon as possible
anyway

16
Section – II of contract

Indemnity

Each party will indemnify the other


against potential liability for accidental or
planned infringement of IPR due to their
own fault
e.g. if the software includes copyrighted components which
the developer had no right to use

17

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