Are you creating an Application? Are you an Application developer? This is a major investment and may be the foundation of your business.

If you are the client, then you want to ensure that the finished product Application is high-quality and developed on time, and to budget. If you are the developer, you want to address a suite of market practice concerns and issues. Both parties need a well-drafted Application Development Agreement.

This article discusses in detail, critical issues for you to consider in an Application Development Agreement.

What kinds of Applications need an Application Development Agreement?

We’ve written Application Development Agreements for clients for apps as straightforward as mobile search engine tools, to detailed Applications that are the foundation of a whole new business or marketplace.

We represent individuals and business developers in the Information Technology industry, and represent a range of  clients – from experienced business people to sole traders having their first Application created.

What does a well-drafted Application Development Agreement cover?

The key clauses in a well-drafted Application Development Agreement are discussed below. It is important to understand that these clauses may be different depending on whether you want a developer-friendly or client-friendly contract. A reliable information technology lawyer will draft a contract in a way that benefits you. The lawyer also needs to understand the critical issues, and market practice, to address the right issues in a market practice way.

The four key areas that need to be covered comprehensively are:

  1. Application Scope of Work and Deliverables
  2. Ongoing Communication and Reporting Requirements
  3. Intellectual property rights
  4. Dispute Resolution

Application Scope of Work and Deliverables

You need to be very clear on who provides what, when and how. This is so each party knows their obligations. The client has rights if the developer does not comply, but importantly, the developer has rights if the developer does not finish a piece of work on time. Nevertheless, the reason for the failure is because the developer’s client failed to provide necessary information or testing.

There should be a Statement of Work, a definition of Services and a definition of Development Specifications. Services are generally defined as the services to be provided by the Vendor pursuant to this Agreement for the creation and development of the App in accordance with the Development Specifications.

The Development Specifications will be set out in detail as an annexure to the Application Development Agreement.

Ongoing Communication and Reporting Requirements

It is important to have good communication between the developer and client, to address and solve issues quickly.

Project Team: Who are the members of the team and what are their roles? Who should the client contact with what issues? Who at the client’s business can give the developer’s team instructions? This needs to be clearly set out.

Roles and Responsibilities: What will the client do? For example, define each user story and user-story-acceptance-testing criteria, and provide each business value for each story. What are the mutual responsibilities? For example, to attend project meetings and to support and follow practices, processes and procedures defined for the application project. The developer’s responsibilities should be clearly set out in the definitions of Services and Development Specifications. Additional obligations include assigning a project manager for relevant issues to provide a weekly status update.

Status Reporting: The agreement should set out the reporting requirements, for example, a weekly report that covers milestone status. This report can also be used to track action items and escalations between the developer and client.

Issue tracking: The developer needs to use systems mutually agreed with the client for requirements management, issue tracking, document management, source control and other support functions during the project.

Development Methodology: The parties need to agree how the services will be delivered. For example, Agile Software Development is a group of software development methods designed to enable solutions to evolve between relevant people and teams.

Quality Metrics: What quality metrics will apply to the services? The parties need to agree to these and the agreement will set these out. For example, what is the percentage of acceptance tests that should be automated?

Change Control: How will changes be managed? As a project evolves, a client is likely to want to make changes. The parties need to consider how this affects the time-frame and cost, i.e., who pays for the change, and what additional time is allowed?

We can provide our views on market practice ways to deal with all of these important issues.

Intellectual property rights

It is crucial for both the developer and the client to understand how intellectual property will handled. The three key areas to address are:

  1. the intellectual property developed by the developer for this application;
  2. the developer’s own intellectual property; and
  3. open-source software.

Open-source software is computer software that has the source code made available to the public with a license from the copyright holder. It permits users to study, change, distribute the software to anyone and for any purpose.

Type 1

When we act for a client paying a developer, we seek that all intellectual property created for the work, e.g. the software, app or website, be assigned from the developer to the client. The developer then needs to give a moral rights waiver to the client.

Type 2

The developer will seek to carve out its pre-existing intellectual property. This is defined as Proprietary Software, and what items are included in the definition of Proprietary Software can be contentious. A well-advised client will seek a license from the developer to use the developer’s Proprietary Software as required for the client’s application, website or software.

Type 3

The developer will, invariably, use open-source software. What open source software will be used? How should it be dealt with? The client may seek a full list of all open source software used by the developer. It is important to seek warranties from the developer that the developer has read, understood and complied with the requirements for using that open-source software.

This should include that the developer has followed the open-source software license requirements to include copyright notices and permission notices.

How will disputes be resolved?

Disputes arise in development agreements because it is difficult to scope fully all the requirements for an Application from the start. The more complex the Application, the more the parties may benefit from a process of communication and joint problem solving.

It is crucial to address dispute resolution clearly. All parties need a clear path forward if and when disputes arise.

A well-drafted agreement will already have included good channels for communication and regular meetings.

This should include an issues reporting system to be used for requirements management, issue tracking, document management, source control and other support functions.

The developer and client need to agree how to prioritise issues that arise and who bears the time and the cost required to create a solution.

A well-drafted agreement requires clear dispute resolution procedures. We recommend a clear path that requires the parties to seek to resolve disputes themselves. If this is not possible, then parties should seek third party assistance. The goal is to address the dispute outside of court if possible. Court proceedings can be lengthy and costly, and keep both the client and the developer away from their core work and focus.

Conclusion

If you create Applications for a living, we recommend you have a comprehensive Master Application Development Agreement that you can tailor for each new client.

If you are a client having an Application developed, we recommend that you have a written agreement created, or that you seek advice on the developer’s Application Development Agreement. In our experience, the developer’s version is developer friendly and may have clauses and omissions that have a tremendous impact on your business. For example, who owns the intellectual property created?

We’ve helped many application developers and application businesses, and it would be our pleasure to assist you and yours.

Get in touch with LegalVision’s contract lawyers at 1300 544 755.

Ursula Hogben

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