Software Development Contracts - Tressler & Associates, PLLC
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A computer with code on it like in software development.

Software Development Contracts

Technology is the driving force behind many startups and company shakeups. New technology allows businesses to update their operational ability, marketing, and sales process. Whether it be a new online app, a software service, or a new website, there has to be someone to program it. Not every business has a programmer–let alone a team of programmers–with the experience to complete projects like these. So in this instance, the business would need to contract outsourced programmers. This is when you would want to have a software development contract.

These contracts will dictate what needs to be completed by the business contracting out the programmer and the contracted programmer. This also dictates deadlines for the project, the programmer’s payment, rights the business and programmer have to the code, ownership of IP being used in the project, and the ability to end the contract. These contracts can be between the business that needs the programming and the freelance programmer or software development agency. 

Who Does a Software Development Contract Protect?

These contracts are supposed to protect both the business contracting out the software programmer and the programmer. Both need to legally and financially protect themselves, should the other attempt foul play or abandon the contract without good reason.

The business contracting out the programmer needs a guarantee that they’ll receive what they asked for or some kind of recompense. This incentive is for the programmer to not try to abandon the project without permission or without providing a replacement programmer. If there’s a contract with a software development agency, the agency may promise to replace one or more programmers with another. Sometimes, the inability to provide a replacement can be reimbursed. The business is also able to set deadlines for the programmer.

The software programmer is given several rights through the software development contract. These include:

  • The ability to retain ownership of the code they write to use in future projects.
  • A promise from the company that they own the IP the programmer is putting on the site.
  • The ability to end the contract under certain conditions, such as poor working conditions, a toxic work environment, or harassment.

Types of Software Development Contracts

Software development contracts also dictate how the software programmer will be paid. The different ways a business and the programmer can go about this have led to several different types of software development contracts.

Time and Materials Contract

This type of contract is where the business pays the programmer an hourly wage. This type is commonly used because it allows the business to treat the programmer as if they were on a normal payroll. Paying by the hour also allows the business to keep track of the programmer’s progress and only pay for what they’ve received.

There are some downsides to this system. With an hourly wage, with potential overtime, the budget can inflate without much notice. Deadlines may also shift back and forth, making it difficult to predict when the project will be completed. Also, while it presents the opportunity to be more involved with the project, that will also result in having to constantly keep up with the project.

Fixed Budget Contract

This contract type is where the business and programmer agree on a targeted budget. The impetus is put on the programmer to make sure they stick to the budget. Going over budget can lead to consequences that the programmer is responsible for, but they both share the risk. This leads to the business and programmer being focused on meeting their objectives.

This type of contract necessitates a lot of trust, particularly on the part of the business in the programmer. A fixed budget also doesn’t account for new features or needs arising during the development period that the budget can’t fund.

Capped Budget with Accelerated Bonus Contract

This software development contract type is almost the same as the Fixed Budget contract type. The difference is that it offers an incentive to the programmer for quick delivery. If they finish the project before their deadlines, they may receive a bonus of some kind. 

Outside of the same issues that affect Fixed Budget contracts, promising incentives can lead to a rushed job. While having the project finished early can be good, it’s not always worth it when it’s at the cost of the project.

Why You Need Tressler & Associates, PLLC

Software development contracts are tricky. They need to inform everyone of their responsibilities, rights, deadlines, and how they want the programming process to go. Any mistakes can lead to miscommunication on the project and ultimately the project’s failure.

Tressler & Associates has experienced corporate law attorneys who can write and/or review your software development contracts. If you’re a business that needs a programmer, a freelance software programmer, or a software development agency, you can contact us for help.


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