What is a software development agreement?
A software development agreement is a written, legally binding document that outlines the terms of a working relationship between a software developer and the hiring company. A software development agreement is in place to align both parties on the project the software developer is hired for—or the ongoing working relationship.
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Why you need a software development contract
As a software developer, it's critical you present a contract that you're happy with before starting work for a new business. A software development contract aligns both parties on their legal obligations to fulfill the agreement and the repercussions if those obligations are not met.
If you're responsible for presenting the contract, you'll be familiar with every clause in it. For example, maintenance services, the software's intellectual property rights, the case of a material breach, or the misuse of confidential or proprietary information.
In some cases, a developer may also need an official contract when it comes to tax declaration and deductions—depending on what country you're in.
What should be included in a software development agreement?
To present a functional and clear contract to your clients, we've outlined the core areas your software development agreement needs to cover.
Detailed descriptions of the work
Your software development agreement should start off with a detailed description of the work expected. This includes the roles and responsibilities of all contract stakeholders, the software development scope of work, and any third-party materials needed for the project.
Your software development agreement should outline your duties. These include your duties outside of delivering a project. For example, the developer may be expected to maintain a product within reasonable efforts like fixing small bugs and providing general maintenance services for the business's digital product.
Delivery date and timeline of work
Every software development agreement needs a clear roadmap for work deliverables, approval milestones, project kick-off dates, and the final delivery date if the contract is for one project.
If your contract is ongoing, you'll want to include the developer’s written notice period and the same for the business. This notice period is typically between two weeks and one month.
The development agreement should have a clear outline of all payment details. This includes:
- The developer's invoicing period and company invoicing details
- The developer's overall pay: whether it's by project or hour
- The payment deadline and payment method
- Whether the company will pay developer software fees or not
Intellectual property rights in the software
This is a crucial part of the developer contract and one that many companies need in order to be able to assign the developer a project. The intellectual property rights within the software typically belong solely to the client, including the copyright and trademark rights.
On occasions, the developer may use the intellectual property within their portfolio; however, the developer agrees that such software and all intellectual property rights are in the hands of the client.
Tools and Processes
It's a good idea to include any necessary tools and processes in your software development agreement. Some of these tools may already be in use by the client or the developer, so here you need to map out the intellectual property rights if, for example, part of the project is built within the other person's tool.
Here you'll also need to establish an agreement if there is a material breach and who is responsible for doing what if such a breach occurs.
Lastly, you'll need a plan for any tools needed that are not currently owned by the client or the developer. Get all of the below questions answered in this section of the development agreement:
- Who is paying for them?
- Who do they belong to?
- Will these tools come out of your own expense, or will the business pay for them and use them in the future?
- Are they necessary to run the software?
Confidentiality clauses are exceptionally important when it comes to a software development agreement. There's a high chance that the developer shall have access to sensitive information. The company needs assurance that you won't share that information and jeopardize the company's assets or reputation.
There are a few developer warranties that most businesses like to see in a software development agreement. A few of these are:
- In undertaking the contract, the developer is not violating any previous or current contracts with other clients. This includes the intellectual property rights of any third party.
- For a certain time after the project delivery, the software will operate according to spec. If the software fails during that agreed timeframe, the developer will take the necessary steps to fix it—without receiving numeration.
As is the case with most contracts, your software development contract needs a cancellation clause. This is in place for both parties and covers you both, should something unforeseeable arise and call for a cancellation of the work.
Depending on the circumstances, here you'll outline any fees debited should a cancellation occur and any other legal documents that need to change hands due to the cancellation.
Termination of contract & written notice
Termination is not something that anyone wants to discuss; however, it's definitely something that should be in your software development agreement.
The termination of your agreement can come from either party and with a legitimate reason. Here you'll want to outline what's necessary to terminate a contract and how much developer written notice is required, and the same for the hiring business.
A few things to consider necessary to terminate a contract are:
- A contract breach
- A mutual mistake
- The impossibility of performance
- Gross misconduct
- A lack of capacity
- Fraud or a criminal offense
Take a moment to consider why else you or the business would need to terminate your contract, and put these reasons here.
In the last section of your software development agreement, you'll want to cover anything you haven't previously laid out. These are often things that are unique to this particular project or company. Things like access to client tools, liability for responses, or available hours can all live here.
That's everything you need in your agreement to ensure you're set up for success and legally have everything you need covered.
Sample software development contract template
If you're looking for your software development template, look no further. Download a premade template here for free and adapt it to your needs.
What's the benefit of using Bonsai, instead of editing a template yourself?
This Bonsai template has done all of the heavy lifting so you don't have to. We've covered all of the above and left you some blanks to fill in the rest. All of our free contract templates meet legal requirements, so you can start work knowing your agreement is legitimate.
How to create a software development contract with Bonsai
There are two ways you can create a software development contract with Bonsai.
- Standard template
A standard template takes you through a simple form in which you fill in your details. After that, the template will auto-fill your details into the areas of a software development contract template where they're needed. After that, it will enable you to make any edits you wish.
This is great if you don't have your own template or too many specifications to make.
- Blank template
A blank template is the best option if you need to make a lot of specific clauses. In this case, use the information shared here and make your necessary additions.
Both of these contract types will require an e-signature from both parties to come into effect.
Software development agreement FAQs
What are the types of software contracts?
There are three main types of software contracts, and within each, there are variations depending on needs. The main three types are fixed price, dedicated development team, time and materials (T&M).
How do software development contracts work?
Software development contracts act as a legally binding agreement for an agreed scope of work. They ensure both the hiring company and the development freelancer stick to what they've agreed upon.
They usually come as part of the software quotation and are agreed upon before the project begins.