Key Clauses in Software Contracts

There are a number of principal commercial terms in a software contract:

  • Delivery – Software will normally be delivered as ‘object code’ whereby it can be read by a computer and put into operation. This is thought not how the software is written, it is written in source code however the supplier will not supply this. Should the software need updating or amending then the souce code is needed as such this needs to be considered. If the software will need constant updating and you do not wish to paythe supplier for this updating then you will have to negotiate for both the source and object codes to be delivered (this will however come at a cost!)
  • Acceptance – What tests etc need to be carried out before the software is accepted by the buyer
  • Payment – An obvoius one how and when is the supplier to be paid. A lump sum? installments? all of this needs to be determined
  • Term and termination
  • Warranties – there are implied terms under the Sale of Goods Act 1979 (SGA 1979) and the Supply of Goods and Services Act 1982 which are the right to sell or grant possession (S 12(1) & (2) SGA 1979 and S7(1) & (2) SGSA 1982) and also in relation to description, satisfcatory quality and reasonable fitness for buyer’s purpose (S13(1) & 14(2) & (3) SGA 1979 and S8 & 9 SGSA 1982). There are also various express terms that will probably be included for example that the software will comply with a specified function (note the similarites with the implied terms) and that defects in the software are remedied by the supplier.
  • Exclusion of Liability – this is a whole subject in itself and any exclusions of liability must comply with the Unfair Contract Terms Act 1977.

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