A well-drafted 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 time to refine the contract in the best way. This can save money and help prevent further disputes when done correctly.
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 afterwards is 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, often excluding technical and legal experts from the writing. But this limits the ability to assess potential risks and address them in the right way at the right time.
First, don’t delay getting started; Contract negotiations on IT projects take more time than you might think at first. Do not leave the drafting of contracts for the last minute. Contract problems multiply in a hurry. So consider the legal and technical risks at the contract design stage.
Second, set goals. Don’t try to fine-tune all the contract clauses perfectly 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 have been identified, describe them in the contract. It is always useful to have multiple versions of the same contract clause during negotiations. Your goals should be defined in a way that is accepted and agreed upon by all parties involved. For example, the establishment of technical objectives and the application of specifications are crucial for service level agreements.
In IT contracts it is vital to review the parts that provide the scope of the license or transfer of copyright on the software created. Software developers are interested in maintaining the rights necessary for software distribution because individual software, once created for a particular company, can be easily applied elsewhere and then marketed as off-the-shelf software. In contrast, the client who financed the software development very often does not want to leave any financial 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 case of license granting, you must verify if 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 client may transfer the software to third parties; whether the license gives the customer the right 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 responsibility, the duties of the parties in the software implementation process, project management methods, testing, problem resolution. disputes, payment terms, exit clauses, agreement. on the subsequent maintenance of the software, as well as the method of acceptance and transfer of the intermediate and final results of the 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 minor defects that normally always exist in the software. Before accepting the final works of 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, the liability is limited to a certain monetary amount and the loss occurs only due to certain events. In the part that determines responsibility, the laconic formulation that the damage is compensated in accordance with the law may seem more beneficial to the buyer.
In general, the contract drafting process is often underestimated by the parties 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.
