What is a software contract and which are the most common models?

What is a software contract and which are the most common models?

The evolution of the technological scenario in our lives and businesses, which has made almost everything revolve around the digital world, has increased the importance of the more and more common software contracts. 

Software contracts are another contracting modality and to carry them out you can count on lawyers like us, specialized in it. 

Now, what is it and what are its modalities and main characteristics? We will explain it to you in this article.

What are software contracts?

A software contract implies that the owner of the software grants a right of use to a person or company in exchange for an economic remuneration. It can also be a contract for development, support or maintenance, exploitation, among others. 

What minimum aspects must be included in software contracts?

Depending on the type of contract and the interests of the parties, the clauses to be considered will be the following:

• The signatory parties of the contract, with sufficient legal capacity to sign the agreement.
• The definitions of the contractual terms, in particular the technical concepts
• The object of the contract (internal use, authorization for the use or service of third parties…)
• The rights that are transferred through this contract 
• Responsibility of each party
• Responsibility of the supplier 
• Duration of the contract
• Exclusivity or not
• Industrial and intellectual property (copyright, trademark, know-how…)
• Price and method of payment
• Confidentiality
• Delivery, installation and compatibilities
• Delivery of manuals and documentation 
• Warranty and guarantee
• Taxation
• Causes for termination of the contract
• Applicable law and competent jurisdiction 
• Annexes detailing the product, requirements and other clauses adapted to the contract and object of the contract in particular.

Types of software contracts

Software license contracts may contain open source or closed source software (proprietary or closed source software licenses) as well as a scale of nuances within each modality (in the open-source modality there are the permissive ones; Academic Free License v.1.2., BSD License, MIT License… the robust ones; Common Public License v.1.0., eCos License v.2.0., Mozilla Public License, CDDL…). The rights holder (licensor) authorizes a third party (licensee) the right to use or reproduce a software program within certain limits or stipulations. There is no need to make more than a simple mention of the obviousness of the need for consent, the authorization involved in the license. This contract implies the use of the owner’s software, protected by copyright. These contracts exclude the transfer and exploitation of the rights of the software unless otherwise stated in the contract, so it is very important to detail rigorously in its clauses all the points of interest of the parties. Closed source software does not include the transmission of the source code, so it does not allow modifications, while open-source software does include it, being able to evolve it according to the user’s interests.

On the other hand, there are software development contracts, where software is created for the object and services that a company wants to provide, according to its scope and instructions. It is especially important here to establish in detail the responsibilities of the parties, as well as the objectives to be met by the software.

The support and maintenance contract, which has an initial software (license or development), implies that the supplier ensures the correct operation of the software, both by providing for its proper use and by checking its correct evolution.

The Software As A Service contract (SAAS contract), which includes a license to use a software that, to understand it better, is in what we usually know as “the cloud”, the hosting on the supplier’s servers, being able to access it and its corresponding use according to what is established in the contract. 

Finally, in the contracts that we indicate in this article, we mention the software distribution contract, where the owner (licensor) assigns the exploitation rights to a third party (distributor) in a contractually established territory, for distribution to end users (licensees). This modality implies an initial remuneration plus royalties. 

In Letslaw by RSM we have digital law professionals ready to answer your questions, offer personalized advice or carry out the drafting of software contracts, as well as professionals in many other fields that we are always happy to help you.