Since so many people were interested in the explanation as to why template website Terms and Conditions are bad (you can check out the post here), I decided to do a case study into why software development contract templates are bad. In a small business or a startup, it is always tempting or sometimes even necessary to save money and thus development companies often use software development contract templates. However, using bad legal documents may cost you more in the long run. I googled “software development contract template.” You can check out the first search result here, this is the template that I used for this particular case study. Unfortunately, this document does not provide many rights to the software developer and is pretty light on all of the things that should be included in a contract.

Here is a list of all of the things that the template missed:

  1. Customer should represent that he or she will use the product for lawful purposes only.
  2. Customer should be responsible for making sure that all of the information he or she gives to the developer does not infringe on third party rights. For example, if the customer gives the developer their logo and the developer puts it up on his or her website as a portfolio project and then it turns out that the logo actually belonged to someone else, the developer should be protected.
  3. The contract does not allow the developer to own or use the code and or all know-how developed during this project in future projects, which is something that could potentially be very beneficial for the developer to use in future projects. Wouldn’t it be nice if you could just copy and paste the code for that nav bar instead of having to write it from scratch every time?
  4. Customer responsibilities – the software development contract template states that the customer has no obligation to support or assist the developer. Most, if not all developers have worked with a customer who has taken weeks to respond to questions and therefore taken the project timeline way beyond what it should have been. Why would you want to be a part of that again? The contract should state that customer has x days to respond or the timeline for the project will be delayed for x days and you are not responsible for this delay.
  5. Expenses
  6. Taxes
  7. Changes to scope of work or schedule – the software development contract template does provide a very short paragraph on changes to scope of work or schedule. However, the template does not provide that such changes should be written. Why should they be written? So that you do not have to play the “he said she said” game with a client who wants the moon for a small budget project and later says that you promised to do x even though you didn’t.
  8. Force majeure – this is a paragraph that states that you do not have to perform if you cannot perform due to acts of nature. For example, if a tsunami floods your studio and your equipment is ruined, you are not required to perform on the contract.
  9. Publicity and marketing – this paragraph provides that you can use the client’s name and the project on your marketing materials.
  10. Limits on liability – the template contract does not have any limits on liability. Thus, you could be held responsible for consequential damages. What are those? For example, if the client’s website goes down for a few days due to your error, you could be held responsible for all of the revenue that your client lost because of the website being down. Limiting your liability to only the cost of the project itself would be wise because it may save you a whole lot of money.
  11. Disputes and arbitration – the software development contract template does not say anything about what happens if there is a dispute. Therefore, you would most likely be going to court, which is costly and time consuming. This does not apply in every case, but for some, arbitration is a better decision because it may be cheaper and faster.
  12. Indemnification – the template contains no indemnification for the developer. If the customer gets indemnification why shouldn’t you?
  13. Venue and limitation of actions – the contract does not specify where you will litigate this matter. Obviously, you would not want to spend money on travel and lodging when you have to go to another state to litigate this action. The statute of limitations for breach of contract in Illinois is 10 years. This means that you can get sued over this contract 8 years later. So why not shorten this period?

The above illustrates that template software development contracts are missing in substance and by using them you are giving up a certain number of rights which you may not want to give up. And that’s why software development contract templates are bad.

Best,

Donata Kalnenaite, Esq.