Software development agreement template

Software development is a complex process involving multiple stakeholders, significant investments and critical timelines. A well-crafted software development agreement is essential to ensure the project’s smooth execution and the protection of all parties involved. This guide will cover everything you need to know about software development agreements and how to manage them efficiently.

What is a software development agreement?

A software development agreement is a legal contract between a client and a software development company. It outlines the terms and conditions under which the software will be developed, delivered and maintained. This agreement covers various aspects of the project, including timelines, deliverables, payment terms, intellectual property rights, confidentiality and more.

Software development agreements are sometimes known as software development contracts, software development services agreements, or software project agreements. Whatever the name, these agreements share the same core function: to provide a clear framework for the development process.

What is the purpose of a software development agreement?

The primary purpose of a software development agreement is to set clear expectations and responsibilities for both parties.

• Define scope and objectives: It outlines clearly the project’s scope, including specific deliverables and milestones. This helps to avoid scope creep and ensures that both parties have a shared understanding of what is to be achieved.
• Establish timelines: It sets realistic timelines for each phase of the project, making sure that both parties are aligned on deadlines. This is crucial for project planning and resource allocation.
• Outline payment terms: It specifies the payment schedule, including upfront fees, milestone payments and final payment upon completion. Clear payment terms help in managing the project budget and cash flow.
• Protect intellectual property: It delineates ownership rights of the developed software and any related intellectual property. This is important in safeguarding the interests of both the developer and the client.
• Ensure confidentiality: It includes clauses to protect sensitive information exchanged during the project. This is vital to maintain the privacy and security of proprietary information.
• Set dispute resolution mechanisms: It provides methods for resolving disputes that may arise during the project. This can include mediation, arbitration or litigation procedures.

Who manages software development agreements?

Typically, several teams within a company manage software development agreements, each with a different role or objective.

Legal teams draft, review and approve the contract terms, ensuring compliance with relevant laws and regulations. They also provide legal advice on any issues that may arise during the project.

Project managers oversee the project’s execution, ensuring adherence to the contract’s terms and timelines. They act as the primary point of contact between the client and the development team.

Procurement teams handle vendor selection, negotiations and contract execution. They make sure that the best terms are negotiated and that the contract aligns with the company’s procurement policies.

IT and software development teams ensure that the technical aspects of the agreement align with the project’s goals and requirements. They are responsible for the actual development work and ensuring that it meets the agreed-upon standards.

When are software development agreements used?

Software development agreements are used in various scenarios, such as:

• Custom software development – when a company hires a developer to create bespoke software tailored to its specific needs. This can include enterprise applications, custom databases or specialised software tools.
• Software as a service (SaaS) – when engaging with a SaaS provider to develop and maintain cloud-based software. This includes subscription-based software solutions that are accessed online.
• Mobile app development – when developing applications for mobile devices. This can include apps for iOS, Android or other mobile platforms.
• System integration – when integrating new software with existing systems and infrastructure. This is common in scenarios where new software needs to work seamlessly with existing business systems.
• Software maintenance and support – when contracting for ongoing support and maintenance services for existing software. This includes updates, bug fixes and technical support.

What should a software development agreement template include?

To achieve the objectives and cover the projects we’ve previously discussed, a comprehensive software development agreement template should include the following sections:

Introduction. Identifies the parties involved and the purpose of the agreement. This section provides the context for the agreement.

Project scope and objectives. Defines clearly the project’s goals, deliverables and milestones. It should provide a detailed description of the software to be developed and the functionality it must have.

Timelines and milestones. Establishes the project's timeline, including key contract milestones and deadlines. This helps in tracking progress and ensuring timely delivery.

Payment terms. Details the payment schedule, including amounts, due dates and any conditions for payment. It should also specify any penalties for late payments or bonuses for early completion.

Intellectual property rights. Outlines the ownership and usage rights of the developed software. It should specify whether the client or the developer will own the intellectual property.

Confidentiality. Includes clauses to protect any confidential information exchanged during the project. This can include non-disclosure agreements (NDAs) and data protection clauses.

Warranties and liabilities. Specifies the warranties provided by the developer and the extent of their liability. This can include guarantees on the software's performance and reliability.

Dispute resolution. Provides mechanisms for resolving any disputes that may arise during the project. This can include mediation, arbitration or litigation procedures.

Termination clause. Details the conditions under which the agreement can be terminated. It should specify the notice period and any penalties for early termination.

Signatures. Includes signature lines for authorised representatives from both parties. This makes the agreement legally binding.

How are software development agreements usually managed?

1. Initial drafting

The manual process of managing software development agreements begins with drafting the initial contract. This typically involves:

• Identifying requirements, gathering details from the client and the development team.
• Drafting terms and conditions, including scope of work, deliverables, timelines, payment schedules and confidentiality clauses.
• Legal review of the draft to ensure compliance with relevant laws and to address potential risks.

2. Negotiation

Once the initial draft is prepared, the negotiation phase begins:

• Stakeholder review, sharing the draft with all stakeholders, including clients, developers and legal teams.
• Collecting feedback and proposed changes from all parties.
• Making necessary revisions based on the feedback, often requiring multiple rounds of edits.

3. Approval and signing

After negotiations are complete, the agreement needs to be approved and signed:

• Securing approvals from internal decision-makers, such as project managers, legal advisors and executives.
• Sending the final draft to the client for their approval.
• Coordinating the signing process, which may involve printing, signing, scanning and sending the physical copies, or using electronic signature software.

4. Storage and retrieval

Once signed, the agreement must be properly stored for future reference:

• Physical storage of hard copies in filing cabinets, which involves organizing and labelling files for easy retrieval.
• Digital storage – scanning and saving electronic copies in a shared drive or document management system, ensuring proper naming conventions and folder structures.

5. Monitoring and compliance

Managing the agreement doesn’t end with storage; ongoing monitoring and compliance are important:

• Keeping track of project milestones, deliverables and deadlines outlined in the agreement.
• Monitoring payment schedules and ensuring timely invoicing and payment collection.
• Regularly reviewing the agreement to ensure all parties are complying with the terms, including confidentiality and non-compete clauses.

6. Amendments and extensions

Over the course of the project, changes may be needed:

• Drafting amendments to address changes in scope, timelines or other contract terms.
• Negotiating and securing approval for amendments from all parties.
• Updating stored versions of the agreement to include all amendments.

7. Renewal and termination

At the end of the contract term, decisions need to be made about renewal or termination:

• Drafting and negotiating renewal terms if the project is ongoing.
• Termination, which includes making sure that all deliverables are completed, final payments are made and any termination clauses are adhered to.
• Archiving the contract and associated documents for future reference and legal compliance.

Is there a better way to manage software development agreements?

Managing software development agreements manually is a complex and time-consuming process. From drafting the initial contract to storing the final signed version, every step involves significant effort and coordination. Juro’s AI-native contract management solution offers a comprehensive solution that streamlines the entire lifecycle of these agreements, making the process more efficient and less prone to errors.

Efficient contract creation

One of the most labour-intensive stages in managing software development agreements is the initial drafting of the contract. Traditional methods require significant time to gather requirements, draft terms, and ensure legal compliance. 

Juro simplifies this with automated contract templates and AI drafting capabilities. Pre-approved templates ensure that contracts meet all legal and business requirements from the start. Additionally, Juro’s AI tools can help in drafting standard clauses, drastically reducing the time spent on initial contract creation and minimizing the risk of errors.

Streamlined negotiation

Negotiating contract terms can be a drawn-out process involving multiple stakeholders. Juro’s platform facilitates real-time collaboration, allowing all parties to work on the same document simultaneously. This feature eliminates the need for multiple document versions and lengthy email chains. Stakeholders can leave comments, suggest changes and track all modifications in one place. Juro’s version control ensures that everyone is working from the most current version of the contract, preventing miscommunications and errors.

Seamless approval and signing

The approval and signing phase can often be a bottleneck, especially when it involves coordinating with multiple parties. Juro addresses this with automated approval workflows and built-in eSignature capabilities. The platform routes contracts to the appropriate people for review and approval, making sure that nothing is overlooked. With e-Signatures, the need for printing, scanning and mailing documents is eliminated – which speeds up the process significantly.

Centralized storage and easy retrieval

Once contracts are signed, they need to be stored securely and be easily retrievable for future reference. Juro provides a centralized, cloud-based repository for all contracts. This means that contracts can be accessed from any device, at any time. The platform’s advanced search functionality allows users to quickly find and retrieve contracts based on keywords, dates or other criteria. Juro also maintains a complete audit trail of all activities related to each contract, enhancing transparency and compliance.

Ongoing monitoring and compliance

After a contract is executed, ongoing monitoring and compliance are critical. Juro helps by setting reminders for key milestones, deliverables and payment schedules. Automated alerts ensure that deadlines are never missed. Regular compliance checks can be facilitated using Juro’s reporting and analytics tools, which help to identify any deviations from the agreed terms and ensure that all parties adhere to their obligations.

Easy amendments and extensions

Over the course of a software development project, changes to the agreement are often necessary. Whether it’s due to a change in scope or new requirements, Juro makes managing these changes straightforward. The platform provides templates for common amendments, so new contract terms can be generated quickly. Stakeholders can collaborate on these changes in real-time – just as they did during the initial negotiation. And all amendments and extensions are stored with the original contract, creating a complete and easily accessible record.

Renewal and termination management

As contracts approach their end dates, decisions need to be made about renewal or termination. Juro simplifies these end-of-term processes with automated workflows for contract renewals, ensuring that nothing is overlooked. For terminations, the platform helps manage the process efficiently, ensuring that all contractual obligations are met and documented.

Juro transforms the management of software development agreements by streamlining every stage of the contract lifecycle. By reducing the manual workload and enhancing overall productivity, Juro enables organizations to focus on delivering successful software development projects.

Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.