Many Australian business owners are using freelance sites such as UpWork to hire overseas software developers to develop their apps. Overseas software developers are usually cheaper to engage compared with local talent. However, you need to do your research carefully on the quality of the software developer. Otherwise, you may find yourself out of pocket for legal risks that you could have easily avoided. This article sets out your key legal considerations when you are looking to engage an overseas software developer.
Choosing the right developer makes the difference between a success story or a bad experience with outsourcing. Therefore you should do your research (otherwise known as ‘due diligence’) when deciding who to engage for your app. As part of the process, you should consider:
- what kind of work are they able to complete;
- whether they have worked in your industry or field of expertise;
- the type of apps or platforms that they’ve previously designed;
- their communication style;
- the location of the developer; and
- whether the business is facing any financial difficulties.
To answer these questions, you can:
- set out in writing the kind of work and expertise that you require in writing to demonstrate clear communication of your expectations and evidence of correspondence between you and the developer;
- download or use their app or platforms to determine the quality of work;
- avoid any miscommunications by ensuring the agreement is drafted in the right language;
- clarify where they are based, so you know how to manage your communication and workflow expectations;
- ask questions about how they respond and resolve issues with software development; and
- check their local public register if they have been made insolvent, to ensure they will be able to produce your work.
These discussions will provide the basis for key terms and conditions in a software development agreement. The developer will usually provide the software development agreement or you can provide your agreement.
When discussing your app or platform with the developer, ensure that all information that you provide, including business materials and networks, is kept confidential. You could ask the developer to sign a confidentiality agreement before you sign the software development agreement. Additionally, your software development agreement could include confidentiality terms about your past and future discussions surrounding the app or platform.
Intellectual Property (IP)
Software development agreements prepared by developers generally state that all IP created is owned by the developer and licensed to the client. As the client, you should own the IP. Check if your agreement includes an IP assignment clause that will ensure the developer transfers their ownership of the IP to you on the completion of the project.
Software development usually involves the creation of precedent code, which is the foundation of many software developers’ business. However, software developers will create code that is specific to your app or platform. Your IP assignment clause can cover code that was created just for your project.
Your software development agreement should set out the software development services you expect to receive. The agreement can set this out in a schedule of services. You may want to know how to request amendments to the scope of work, so you have an idea of how much it would cost you to amend the scope of work.
Some software development agreements match the schedule of services with a timeline and fixed costs. That means you make payment progressively if the developer has delivered those services. Other agreements may provide a cost estimate and bill you on hourly rates. Consider whether the costs are fixed or provided as a guideline. Do not forget to communicate clearly on how long you expect international transfers of money to take.
Reviewing and Controlling Deliverables
Software development generally occurs in stages (known as phases) which allows you to review and test the development product at each stage. You should make the specification for each phase clear, including:
- the services provided;
- the timeline for development; and
- the milestones you expect with a completed phase.
Once a phase is complete, you enter acceptance testing. Acceptance testing is a timeframe that allows you to test the app or platform to make sure it matches your specifications. If it does not, you can ask the developer to make changes. If you are still not satisfied, you may wish to end the agreement. The right to terminate your agreement quickly is important. Even if you have done your due diligence, there is still a high risk of poor quality work from overseas software developers.
All agreements include a ‘governing law’ clause which determines the law that applies and which courts you can access. Generally, the developer’s local law will govern any software development agreement that they provide to you.
You may prefer to draft a software development agreement whose governing law is in Australia, as you may feel better protected under Australian law. Check if the developer is happy to sign your proposed software development agreement. If you prefer to sign the developer’s agreement, you may want to engage a lawyer from the developer’s country who can review the contract for any potential issues.
Software development agreements should set out practical steps to resolve disputes. Initial steps could include requiring parties to set out a summary of the situation and to meet in good faith. If they are based overseas, you may want to arrange a phone conference. If unsuccessful, you can ask for an independent third party (such as a mediator) to step in.
You only take legal action once you have exhausted your other options. However, taking legal action, especially against someone who lives outside of Australia, can be very expensive and complicated. It is best to resolve any disputes through non-court processes wherever possible.
Engaging an overseas software developer can be a complex exercise. Your major legal risks include loss of IP and quality control. Do your research on the developer’s quality. Ensure your software development agreement protects your IP and maximises quality control. If you are having difficulties with your software developer, find a way to resolve the issue informally as international court action is expensive. If you have any questions or require assistance with your software development agreement, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.
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