Software development agreement

curl -X POST https://dealroom.todo.law/api/v1/agent/contracts \
  -H "Authorization: Bearer drk_YOUR_KEY" \
  -H "Content-Type: application/json" \
  -H "Idempotency-Key: $(uuidgen)" \
  -d '{
    "contractType": "SOFTWARE_DEVELOPMENT",
    "governingLaw": "ENGLAND_WALES",
    "language": "en",
    "party": {
      "legalName": "Your company"
    },
    "counterparty": {
      "legalName": "The other company"
    },
    "terms": {
      "project-name": "<project-name>",
      "project-description": "<project-description>"
    },
    "inline": "md"
  }'

What it is and when it is used

A software development agreement is used when a client commissions custom software (a web or mobile application, a platform or an AI system) from a development agency, studio or independent developer, rather than licensing an existing product. It is also used to put on paper a build that started informally or on a statement of work alone.

Besides scope and price, the agreement deals with the risks that are specific to software: who owns the code, how the client checks it before paying, whether the client receives the source code, which open-source licences may be built in, whether AI tools may write part of it, and who answers for defects once the software is in use.

Who signs it and in which role

Two parties sign:

• The Client, the company that commissions and pays for the software.
• The Developer, the company or professional that designs, builds and delivers it.

The parties fill in the facts of the project: the project name and a short description (both required), and optionally the total budget, a daily rate for time-and-materials work, the warranty period in months (6 by default), the target delivery date and the technology stack.

Key clauses

Development methodology

Agile development in two-week sprints with a product owner on the client's side, a waterfall project in sequential phases each approved before the next begins, a hybrid of sprints inside fixed milestone phases, or time and materials with no fixed scope. Waterfall gives the client the most predictability; agile and time and materials give the developer more room.

IP ownership

The client owns all work product; or the developer keeps ownership of the code and grants the client an exclusive, perpetual licence while remaining free to reuse generic components; or both parties own the software jointly and may each exploit it.

Payment structure

A fixed price paid in instalments, time and materials at agreed rates, or payments tied to the completion and acceptance of defined milestones.

Acceptance testing

Formal user acceptance testing with test cases and a right to reject non-conforming work, deemed acceptance if the client does not reject within a set period, or continuous acceptance at each sprint review.

Warranty period

The developer fixes defects free of charge for 90 days, 6 months or 12 months after acceptance. The skill describes six months as the market standard.

Source code delivery

Full repository access during and after the project, delivery of compiled or deployed software only (with the source kept by the developer), or source code escrow with an independent agent.

Change management

A strict written change order signed before any work starts, a pre-approved change budget (typically 10 to 15% of the project value) that can be used without individual change orders, or informal requests answered by a formal impact assessment within 5 business days.

Confidentiality

Mutual confidentiality, a one-way obligation protecting the client's information only, or mutual confidentiality with a right for the developer to mention the project in its portfolio without revealing confidential details.

Liability and indemnity

Each party's liability capped at the total fees, with carve-outs for confidentiality, wilful misconduct and fraud; the same cap but unlimited developer liability for IP infringement; or mutual indemnities in proportion to fault, capped at twice the fees. A fourth position, for software that will be placed on the EU market, allocates recourse under the EU Product Liability Directive and is meant to be combined with a general cap.

Termination and handover

Either party may terminate on 30 days' notice and pay for work done; termination only for material breach after a cure period; or either party may stop at the end of any milestone.

Open-source components

A warranty that no component imposes copyleft on the client's code, backed by a disclosure schedule; permissive licences only, with consent needed for anything else; or copyleft allowed if the developer keeps it architecturally separate, with specific consent for AGPL in software offered over a network.

AI-assisted development

Generative AI prohibited for deliverable code; AI tools allowed from an approved, disclosed list with provenance records, human review and a warranty against verbatim copying of licensed third-party code; or free choice of tools with the developer carrying the full infringement warranty and indemnity, and the client accepting that purely AI-generated parts may not be protected by copyright.

The standard terms also cover professional development standards with secure coding practice, a named project manager and progress reports, disclosure of third-party components, data protection (with a separate data processing agreement where the developer handles personal data) and regular backups.

What the two sides usually negotiate

The client generally prefers waterfall, full ownership, a fixed price, formal acceptance testing, a 12-month warranty, full repository access, one-way confidentiality, unlimited developer liability for IP infringement, a no-copyleft warranty and a ban on generative AI. The developer generally prefers time and materials, keeping ownership of its code, deemed acceptance, a 90-day warranty, delivering compiled code only, freedom to use copyleft with segregation and unrestricted AI tools.

When the two sides disagree, Dealroom proposes the balanced positions in the skill:

• Methodology: the hybrid of sprints and milestones.
• IP: joint ownership.
• Warranty: 6 months.
• Change management: the pre-approved change budget.
• Confidentiality: mutual.
• Liability: the cap at total fees, or mutual proportional indemnities.
• Termination: exit at a milestone gate.

Payment, acceptance, source code and open source have no fully neutral option; milestone payments, continuous acceptance, escrow and permissive licences only are the positions closest to the middle. On AI, the disclosed-tools option is the default and leans only slightly towards both sides.

Jurisdictions and languages Dealroom supports for it

Dealroom drafts this agreement under the law of California, England and Wales and Spain, in English or Spanish.

• California: disputes go to the courts of San Francisco County and the parties waive a jury trial. The assignment of new IP respects Labor Code section 2870 for inventions made on the developer's own time, and if the developer is an individual the agreement records that contractor status must pass the ABC test.
• England and Wales: ownership follows the Copyright, Designs and Patents Act 1988, so assignment to the client must be in writing. The Supply of Goods and Services Act 1982 implies reasonable care and skill, and liability for fraud, death or personal injury caused by negligence is never excluded.
• Spain: ownership follows the Intellectual Property Law. Because the employer presumption covers employees only, the assignment to the client is express, in writing and states its duration and territory; moral rights cannot be waived. Data protection follows the GDPR and the LOPDGDD, and disputes go to the courts of the client's registered office. The skill notes that, as of July 2026, Spain had not yet transposed the new Product Liability Directive.

Common mistakes

• Assuming the client owns the code. Without a signed assignment, a contractor's work stays with the contractor in all three jurisdictions.
• Tying escrow release or termination to the insolvency filing itself. Such triggers are generally unenforceable or restricted in all three jurisdictions; the skill keys them to cessation of performance or rejection of the contract instead.
• Copying US capital-letter exclusions into an English-law contract. Without the carve-out for death and personal injury caused by negligence they are partly unenforceable.
• Treating every copyleft licence alike. LGPL used by dynamic linking does not reach the client's own code the way GPL can.
• Saying nothing about AI tools. A 2026 development contract without AI provisions leaves ownership, infringement and confidentiality risk unallocated.
• Ignoring the EU product liability regime. Software placed on the EU market after 9 December 2026 falls under strict liability that the contract cannot remove.