7 Important Points to include in Software Agreements (Part 2)

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If you have consulted a software developer to help you develop software, you may also have to enter into an agreement with the developer so that specifications are understood and duties are clearly stated.  

Sometimes, off-the-shelf (ready-made) software may not be suitable for your company and you want a bespoke software that is developed just for you from the scratch. You will therefore have to engage your lawyer to prepare a comprehensive Software Agreement (“the Agreement”).

In addition to the standard clauses, below are some clauses that should be considered in the Agreement to protect your investment:

1. Change is the most constant thing in the field of Information Technology. You may not be able to predict the relevance/applicability of your software in the nearest future, but you can ensure immediate intervention by your software developer. The way to go about this is to instruct your lawyer to add a clause for periodic review of the software. Although, some developers will charge you a little more for the service, but you will get value for money and you will be well placed for future eventualities.

2. Ensure that there is a clause for training and retraining of your team. You may also request for a user manual, maintenance guide, installation instruction, etc.

3. You may not be able to guarantee the availability of your software developer to attend to your queries. Sometimes too, events may happen that make it impracticable for the software developer to continue to operate or maintain the software. If it is intended that you will have the copyright in the software to be developed, one of the ways to ensure that the developer does not hold you to ransom is to insert a clause which mandates the developer to hand over the source code to you (including the updated source code any time there is an update). If the developer has an issue with this, you may request for a clause which mandates the developer to release the source code to a third party (usually known as an “escrow agent”) who would have custody and can only release it to you in circumstances where the software developer has defaulted or where other conditions have happened by which it is important for you to have access to the code. The practice of escrow agent is not common in Nigeria, but that is not to say that arrangement cannot be made for it particularly in multi-million naira software contracts.

4. One of the ways to have a healthy relationship with your software developer is to have problem solving clauses. I discussed this in my article 6 Important Points to Note in Software Agreements (Part 1). One of the circumstances in which you can have such clause is in case of late delivery which was not caused by you or some unforeseen events; in which case you may have a clause that makes you entitled to a stated amount per day for the period of the delay. Although, you must also have a clause that allows you to terminate the Agreement if delay continues for an inexcusable length of time.   

5. Your software developer is ordinarily the owner of copyright in the software, but that will not be the case if your agreement state that intellectual right in the software is yours. Therefore, if it is important that you have ownership of the software, then, make sure your Software Agreement states this in clear terms.  An example is as follows:

“The Software Developer agrees that ………...[your company name] will be the exclusive owner of the rights, interest and title in the software and its components”.

6. What if the software claimed to have been designed for you is actually the product of another person and you had thought it was designed from the scratch by your software developer? The easy safeguard will be for you to get your software developer’s undertaking in the introductory part of the Software Agreement that the software to be developed for you will be original and not a violation of an existing intellectual property of another person.   

An example is as follows:

“The Software Developer undertakes that the software and its components will be original and not a violation of an existing intellectual property”         

You don’t have to stop at the undertaking, you may also add that you have a right to refund and compensation if a third party claim of software ownership arises.

7. You might ask, “what if the software company offers me an already prepared agreement to sign?” simply get a competent lawyer to review it and advise you.

Other than the above suggested clauses, there are standard clauses which your Agreement should have. In essence, the points listed in this article are not exhaustive and the peculiarity of each client’s specification may differ, it is therefore important that you seek advice from an experienced legal practitioner.