© m. scheurer, 2002ct218 professional issues1 ct218 lecture 5 software contracts
TRANSCRIPT
© M. Scheurer, 2002 CT218 Professional Issues 1
CT218 Lecture 5
Software Contracts
© M. Scheurer, 2002 Professional Issues / Lecture 2
Do we need a formal Contract? Most disputes which end up in
courts are caused by lack of clarity as to what each party expected from the other
If a dispute has to be resolved in the courts, this will involve lawyers, accountants, judges, etc. trying to work out each party’s obligations
© M. Scheurer, 2002 Professional Issues / Lecture 3
Who needs lawyers anyway? Optimists are the best deal makers Pessimists are the best contracts writers Lawyers are born pessimists (when they
draft contracts…)
Hilary Pearson, Computer Contracts
© M. Scheurer, 2002 Professional Issues / Lecture 4
General Contractual Issues Pre-Contractual obligations
Confidentiality agreements (see example)
Invitation to Tender Offer and Acceptance Consideration Unfair Contracts Terms European legislation
© M. Scheurer, 2002 Professional Issues / Lecture 5
Software Contracts (1) Agreement between the parties Commercial in nature Governed by the standard Law of
Contracts Specific problems relating to
e-commerce Digital signature Which law governs the agreement
© M. Scheurer, 2002 Professional Issues / Lecture 6
Software Contracts
Includes: Name of Parties Standard Terms and
Conditions Set of Appendices (Annexes)
© M. Scheurer, 2002 Professional Issues / Lecture 7
Standard Terms & Conditions
Appendix(Annex)
Standard Terms & Conditions
STC
Specific Documents
e.g. Specifications
© M. Scheurer, 2002 Professional Issues / Lecture 8
The Object of the Contract
What is to be produced Contract should provide
Framework for variations to original specifications
Method of calculation of additional payment
Framework for other changes (e.g. acceptance testing, delivery schedule)
© M. Scheurer, 2002 Professional Issues / Lecture 9
Deliverables Source code Command files
(for building and installing the executable code) Documentation Manuals (Reference, Training, Operations) Sofware tools to help maintain the code User training (on site / off site) Training for client’s maintenance staff Test data and test results
© M. Scheurer, 2002 Professional Issues / Lecture 10
Obligations of the Client Information on Client activities/setup Information on software environment Access to staff Facilities for development and testing Facilities for software company staff
on client premises Attendance at progress meetings
© M. Scheurer, 2002 Professional Issues / Lecture 11
IPR and other rights Who owns the rights to what
Books, documents, disks Intellectual Property Rights
Author of the software Software House Client (upon payment)
Written agreement (assignment of rights)
Sale or Licence …
© M. Scheurer, 2002 Professional Issues / Lecture 12
Licencing Agreement (1) Exclusive Licence (expensive)
Software house retains copyright Software house can’t re-use the code
Non-Exclusive Licence (cheaper) Software house retains copyright Software house can re-use the code Client may acquire right to veto grant
of licence to others (competitors)
© M. Scheurer, 2002 Professional Issues / Lecture 13
Licencing Agreement (2) Matters to consider
Duration of licence (termination) Right to assign (transfer) licence to
others Scope of licence
One or more computers One or more sites
ConfidentialityClient is prevented from allowing others to
become familiar with the software
© M. Scheurer, 2002 Professional Issues / Lecture 14
Confidentiality Agreement Confidentiality of Client business Confidentiality of the software and
the properties of the systemApplicable at different stages:
Pre-Contractual stage Whilst software is being developed After delivery
© M. Scheurer, 2002 Professional Issues / Lecture 15
Payment terms
Issues to be considered: Staged payment Milestones Delays and changes (attributable to
Client) Calculating the cost Changes to delivery schedule Changes to performance
© M. Scheurer, 2002 Professional Issues / Lecture 16
Penalty ClausesDelays caused by the Supplier Contract may provide for a fixed penalty
payment for each week/month delay in delivering the software
Not very common Suppliers are reluctant to agree Will be taken into account in calculating the
cost Suppliers have every incentive to deliver as
soon as possible anyway
© M. Scheurer, 2002 Professional Issues / Lecture 17
Indemnity
Each party will indemnify the other against potential liability for accidental or deliberate infringement of IPR due to their own faulte.g. if the software includes proprietary
components which the developer had no right to use
© M. Scheurer, 2002 Professional Issues / Lecture 18
Termination of the Contract Client’s needs or circumstances
may change Software may no longer be
appropriate Issues to consider
Indemnity for termination Ownership of software developed
so far
© M. Scheurer, 2002 Professional Issues / Lecture 19
Other contractual Issues (1) Quality control Progress meetings Managing the project Acceptance procedure
Determine if Contract has been delivered
Warranty and maintenance Bug fixing (free of charge – e.g. 90 days) Extended warranty (enhancements)
© M. Scheurer, 2002 Professional Issues / Lecture 20
Other contractual Issues (2) Arbitration
Arbitration clauses are common Cheaper and faster than going to court Usually governed by Arbitration Act 1996
Inflation In case of long term maintenance Automatic review of agreed price Frequently linked to Business Costs Index
© M. Scheurer, 2002 Professional Issues / Lecture 21
Other contractual Issues (3) Applicable Law
Choice of the law which applies to the Contract (and its interpretation)
If the parties have registered offices in different countries
If the performance of the Contract involves more than one jurisdiction
Language of the Contract If contract is to be translated, which is the
binding version
© M. Scheurer, 2002 Professional Issues / Lecture 22
Limitation of LiabilityUnfair Contracts Terms Act (Section 3) Provides that a software house using a
standard from contract cannot, unless it is reasonable to do so, Exclude liability for its own breaches of
contract, or Claim to be entitled
To render a contractual performance substantially different from that which was reasonably expected of it
Render no performance at all (in respect of the whole or part of its contractual obligations)
© M. Scheurer, 2002 Professional Issues / Lecture 23
Test of ReasonablenessCase Study: St Albans City and District Council v.
International Computers Ltd [1996] 4 all ER, 481
Errors in program resulted in a loss to the Council of £1.3 million.
ICL’s standard terms and conditions stated that its liability “will not exceed the price or charge payable for the item of Equipment, Program or Service in respect of which liability arises or £100,000 (whichever is the lesser)…”
© M. Scheurer, 2002 Professional Issues / Lecture 24
Further ReadingFrom the reading list (available in the Library)
Bott, F. et alProfessional Issues in Software Engineering, 3rd
Edition, Taylor and Francis, Chapter 5
Other sources (for non lawyers) Bainbridge, 1996, Introduction to Computer law, 4th
Ed., Chapters 14-22. London, Pitman Reed (ed.), 2000, Computer law, 4th Ed. Blackstone
Press Rowland and Macdonald, 1997. Information
Technology law. Cavendish publishing, Ch. 3 & 4