How can I limit the liability associated with my software?

Summarise with: ChatGPT Claude Perplexity Microsoft Copilot

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Table of Contents

• What provisions are in a software development agreement?
• Limitation of liability and disclaimers
• Conclusion

When developing software that you may sell or licence to another party under a software licence agreement, it is important to clearly set out what you are responsible for and what you are not. The key is to prepare a strong software development agreement, in which you can effectively manage your clients’ expectations in relation to the functionality of the software. Here, you would set out exactly what your software can and cannot do.  You can also set out what you will be responsible for at different stages of the development process and what you will not be responsible for. By setting out these provisions, you can go a long way in limiting the liability associated with the development of your software for a client. So, if you would like to prepare a software development agreement, it is advisable to get in touch with an IT solicitor who has a thorough understanding of how software is developed and the legalities of this arrangement.

What provisions are in a software development agreement?

To give you an idea of what a software development agreement is and the provisions it covers, we have put together an outline of the key clauses that we believe may be useful to incorporate into the agreement. These clauses include:

• Who the parties to the agreement are;
• The nature of the software, including a description of its features and the purpose of its development;
• Your duties as a developer, including the specifications of the software that you will be developing;
• The client’s duties eg. to provide you with timely information or with relevant feedback;
• The delivery time of the software and the details of the various development stages/milestones;
• How much you will be paid for your services and through what payment mechanisms eg. will you invoice the client every fortnight for services rendered?
• Who owns the intellectual property in the software;
• Whether confidential information will pass between the parties, and if so, on what terms this information is to be kept confidential and when it may be disclosed;
• What you agree to be responsible for and what you will not be held liable for;
• A detailed outline of the warranties that you provide in relation to the software and your compliance with the Australian Consumer Law, if applicable;
• How disputes between the parties can be resolved; And
• When and how the agreement will come to an end.

Limitation of liability and disclaimers

As a provider of services, you may be required to make certain consumer guarantees under the Australian Consumer Law. These guarantees relate to, for example, providing a service that is satisfactory in terms of what you have indicated to the client will be included in the service. For a detailed explanation of your obligations under the Australian Consumer Law, please visit the Australian Competition and Consumer Commission website at https://www.accc.gov.au/ However, in your agreement you may indicate that apart from the guarantees that you are required to make under law, you are not responsible for other factors. For example, if you are developing an app that is designed to track weather forecasts, your client cannot hold you responsible if the app does not provide information regarding clothing sales or traffic jams. Therefore, it is a good idea to list exactly what the client may hold you responsible for and what they cannot pursue you for. A useful provision to include might state that you cannot, for example, be liable for any delays in the development of the app due to the client providing you with incorrect information.

Conclusion

In preparing a strong software development agreement, the rights and responsibilities of both parties should be clearly set out. This means that you will reduce the risk of being held liable for acts or omissions that you have clearly indicated you are not responsible for. For further information on how to limit your liability, we suggest that you speak with an IT solicitor.