What to include in a Development Agreement

Generally speaking, whether you’re a back-end engineer or a front-end specialist, the legal considerations for web developers entering into a contract, or development agreement, will be similar for all service-based businesses. Having said that, there are some aspects to web development that require further consideration. For more in-depth advice, we recommend you speak with an IT lawyer.

Iterations, Amendments, and the Scope of Work

In the area of web development, it is commonplace for clients to request multiple rounds of amendments and changes to the scope of work in the middle of a project. This usually occurs because the client changes their mind midway through a job, as their vision for the project evolves and shifts. To counter this type of behaviour, it is important that these concerns be flagged with your IT lawyer who will be able to insert clauses into the Development Agreement that:

• Clearly define the scope, and the circumstances under which any ‘change in scope’ will be permitted; and
• Give a procedure as to how changes in the scope will be dealt with.

Wording and Pricing

When your IT lawyer is drafting the Development Agreement, it is important to adequately define what will constitute minor or major changes in scope. This can be done by inserting examples or by inserting exclusions, i.e. ‘A minor change does not include …’. Regardless of how the ‘Scope’ clause is defined, the most appropriate wording will depend on the type of Development Agreement and the nature of the work.

In terms of pricing, it is best practice to organise what the cost of making changes to the scope will be prior to entering into the Agreement. An hourly basis is usually the most effective way of accounting for the extra work that is commonly needed in Development Agreement.

Test and Accept

It is almost inevitable that newly developed software will have some problems in the initial testing stages. For this reason, an IT lawyer will usually consult with the developer to work out a fair and reasonable ‘Testing and Acceptance’ period. This period allows for the software to be tested, ridding it of any bugs, as well as eliminating liability for any problems that only surface months or years after the developer has already performed their contractual duties.

Once the developer has provided the deliverables, the typical period of time that will be provided in the Development Agreement is 10 business days. This means that after this period has lapsed and all the testing has been done, the client will be deemed to have accepted the software. This means that the developer will not be responsible for any problems that arise after this period. This time limit both puts pressure on the client and makes finding glitches and bugs a shared responsibility.

Protection of IP

Developers should be sure to discuss with their IT lawyer what intellectual property is being transferred in the project. Will the client retain all intellectual property? If not, what exactly will they receive? There are parts of software that developers will seek to retain ownership of, as they reuse these blocks of code for other clients. This intellectual property is sometimes referred to as ‘background’ IP, and can encompass things like a database structure or an algorithm. Under the Development Agreement, the IT lawyer will clarify that this IP is merely licensed to the client, instead of assigning ownership.

If a developer does not make sure to clearly define what is and is not assignable IP, they may end up in a situation where by recycling this background IP with new clients, they are infringing on the IP of their last client.

Conclusion

If you are a Web Developer looking to enter into a Development Agreement with a client, there are certain legal considerations that should be understood. If you are unsure whether your Development Agreement covers all of the above issues, contact LegalVision on 1300 544 755 and speak with one of our team of IT lawyers.