A well-written IT contract is an insurance policy for an IT project. Anyone involved in drafting and negotiating IT contracts must follow a certain methodology to achieve the optimal result. Of course, the methodology depends on the type of IT project and the services provided. The drafting phase is the most appropriate moment to refine the contract in the best way. This can save money and help avoid further disputes when done correctly.
In order to correctly adjust the contract, a good understanding of the technical and legal aspects involved in the IT project and the type of problems that can arise during the implementation of the project and later are required. So the contract has to be specific, not general. Many managers overestimate their understanding of the technical side of IT projects and the associated legal risks, so they often exclude technical and legal experts from the newsroom. But this limits the ability to assess potential risks and address them in the right way at the right time.
First, don’t be late getting started; Contract negotiations on IT projects take longer than you might think at first. Do not leave the drafting of contracts for the last minute. Contract problems multiply with the rush. So consider the legal and technical risks at the contract design stage.
Second, set goals. Don’t try to hone all the contract clauses to perfection at once. Use the ROI method to identify the parts of the IT project that are most critical and profitable for you. Once these parties are identified, describe them in the contract. It is always helpful to have multiple versions of the same contract clause during negotiations. Its objectives must be defined in a form accepted and agreed upon by all parties involved. For example, setting technical goals and applying specifications are crucial to service level agreements.
In IT contracts it is vital to review the parts that provide for the scope of the license or transfer of copyright on the software created. Software developers have an interest in maintaining the rights necessary for software distribution because individual software, once created for a particular company, can easily be applied elsewhere and can then be marketed as standard software. By contrast, the customer who funded the software development very often does not want to leave any economic royalties to the software developer. One of the most important parts of an IT contract is the detailed description of the rights granted through the use of the software. In the case of granting a license, you must verify whether the license is exclusive or non-exclusive, for a defined or indefinite period; as well as what territory it covers; how many users will be able to use the software at the same time; under what conditions the customer may transfer the software to third parties; whether the license entitles the customer to modify the software independently, etc. Here it is important to agree on the source code of the software, for example to indicate whether the source code is part of the contract or not, because the further development of the software depends on it.
In addition, it is also very important that the contract clearly establishes the software quality requirements, guarantees and liability, the duties of the parties in the software implementation process, project management methods, testing, resolution of disputes, payment terms, exit clauses, agreement. on the further maintenance of the software, as well as the method of acceptance and transfer of intermediate and final results of work. By accepting the final version of the software, the customer must confirm that the software corresponds to the technical specification provided in the contract and works without material defects. After the signing of the act of acceptance-transfer, the software cannot be rejected due to the minor defects that normally always exist in the software. Before accepting the final works of the computer software, it is advisable to agree on a certain period during which the operation of the final version of the software will be tested.
It is useful for the software producer to limit liability to the extent permitted by law. Generally, liability is limited to a certain monetary amount and loss occurs only due to certain events. In the part determining liability, the laconic formulation that the damage is compensated in accordance with the law may seem more beneficial to the buyer.
In general, the parties often underestimate the contract drafting process in the hope that friendship can resolve all conflicts in IT projects. But life teaches us that when a conflict arises, the parties tend to trust the contractual wording more than oral promises.
