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Most people interact with applications (apps) on their mobile phone every day. Once an entrepreneur thinks of a new idea for an app, they will need to find a developer to help them bring it to life. As an app developer, it is important you are on the same page as your customers, so that both parties have an understanding of what will be created. This will also ensure you get paid with little troubles. An application development agreement sets out the understanding between the parties and is an important part of an app developer’s business. This article will outline how to draft an application development agreement for your business.

When Will I Need an Application Development Agreement?

You should use an application development agreement any time you are doing software development work for a customer. It does not matter whether you are doing work for a large corporation, or a sole trader who wants to develop an app as a hobby.

The application development agreement will:

  • help the parties establish key obligations;
  • set out who will be responsible when things go wrong; and
  • outline who owns the application and any code within it.

Starting a project with an understanding of your relationship with a customer will hopefully minimise the change of the parties having a disagreement.

What Does a Well-Drafted Application Development Agreement Cover?

Most app developers will prefer to have a master contract prepared for them with terms and conditions that apply to all of their clients. Often, they will include a schedule at the beginning of the agreement that sets out the commercial details of the arrangement. This includes the:

  • party details;
  • scope of work and deliverables;
  • fees; and 
  • payment terms.

This means that the developer can update the schedule for each new client, without having to update their terms and conditions each time. This is unless the customer would like to negotiate them.

Scope of Work and Deliverables

One of the most important things that an application development agreement should set out is the scope of work and deliverables that the customer is expecting the app developer to create for them. The specifications should be set out in detail so that everyone knows what the contract price includes.

Often, the parties will agree that the app will be developed in different phases, instead of all at once. If this is the case, the agreement should clearly set out:

  • what work will be included in each phase;
  • whether a phase needs to be approved or acceptance tested before moving to the next phase;
  • any relevant milestone dates; and
  • any part-payment obligations.

Variations to the Scope of Work

Your application development agreement should also include a variations clause. A variations clause sets out that if the customer requests you to do some work that you did not initially to, you can point out that they are asking for a variation to the application development agreement. As such, you can ask them to pay for that additional work.

For example, you are mid-way through developing an app for a customer, and the customer tells you that they now want an instant messaging feature within their app. This was not set out in the scope of work and deliverables. As such, you will need to decide whether you want to add the additional feature at all and, if you do, how you will vary the pricing and agreed timing in the contract.

Payment

As an app developer, you need to be paid for all of your hard work and time invested in developing your customer’s app. For this reason, it is important that you have a well set out payments clause.

The payment clause should set out what fee you are charging for your services. If you charge on a fixed-fee basis, defining the scope of work is very important, or you may agree to charge your customer based on the time spent on their app. 

You will also need to set out when the fees are payable and what happens if the customer does not pay. It is a better position for you to collect payment upfront or along the way, rather than as a lump sum at the end of the project, for risk that a customer may not pay you.

Intellectual Property

Intellectual property rights are important for both you and your customer. It can be very problematic if you help a customer create the next big social media app, and your contract did not set out who owned the app.

The application development agreement should address:

  • who owns any new intellectual property created in the course of you providing the services. Often it is the customer that will want this right so that they have the freedom to do what they want with the app;
  • what intellectual property the parties previously owned and will continue to own. For example, if you have base code that you use for many customers; and
  • any intellectual property licences that need to be granted between the parties to allow the other party to use its intellectual property.

Termination

Your application development agreement should set out when either party can terminate the agreement. You will hopefully not need to terminate it, but having this clause provides a safeguard if, for example, your customer is:

  • not paying you for your services; or
  • being uncooperative and not providing you with the information you need to build the app.

In these circumstances, you may need to terminate the agreement and cease providing your services.

Key Takeaways

As an app developer, you should have an application development agreement in place with all of your customers. This is to ensure that you are on the same page with your customer about:

  • what services you will provide;
  • any important timelines;
  • how and when you will get paid; and
  • who owns the intellectual property created.

A well-drafted application development agreement is a good investment for any app developer and will limit the chance of disputes arising. If you need assistance drafting an application development agreement, contact LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

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