Irrefutably, being in IT sector, there are numerous occasions when the IT Company has to enter into different types of agreements to save it from future legal troubles. These occasions include developing and licensing the IT products i.e. softwares, applications, developing websites, providing services relating to any product, collaborating with foreign companies to work on a certain project, and so on. Logically, it would be correct to say that doing a business in any nation can invite litigation. Any commercial agreement plays an imperative role in any business venture. Therefore, it is extremely essential to ensure that the terms and conditions mentioned in the agreement are drafted in a manner while protecting the best interests of the parties.

In this writ-up, we will shine some light on the five crucial agreements that an IT firm should enter into for protecting its business from legal hassles.

Software Licensing Agreement: –

Being in IT Sector, developing software for the clients is one of the popular products. When a developer wants to provide its product to the client for the limited purpose of usage, not for sale, then Software Licensing Agreement is advised to be entered into with the client. This piece of document defines certain terms & conditions pertaining to usage of the software and protects rights of both the parties. The main reasons that IT business owners should enter into Software Licensing Agreement, are enumerated below: –

  • It prevents abuse of software.
  • It allows usage of software by way of licensing, therefore, no need to sell the same.
  • It allows disclaiming warranties.
  • It can limit the liability of IT firm.
  • Can terminate the use of software at any time.

Software Distribution Agreement: –

A Software Distribution Agreement is a legal document by which the software provider i.e. IT Company gives an authority to the distributor to distribute the software to the customers. A Software Distribution Agreement set forth the rights and duties of both the developer and the distributor to avoid disputes later on. There are two types of Software Distribution Agreement i.e. Exclusive Agreement and Non-Exclusive Agreement. In exclusive agreement, the distributor only works as vendor can sell the software in desired boundaries only. Whereas in case of non-exclusive agreement, the distributor can further sell the software to other distributors.

Software Development Agreement: –

In order get protection from any kind of fraudulent activities that may arise during the software development project, an agreement is needed that works as a shield against inevitable conflicts over the things such as work period, specification intellectual property rights, and payment etc. It is entered between an IT firm and the client before embarking upon the process of software development. It is of two types i.e. Time & Material and Fixed Budget.

In an agreement based on time & material, the client has to pay based on the time the developer spends on the project. This type of agreement generally entered into in big projects.

While in case of fixed budget, the scope of work as well as price are clearly mentioned.

Master Service Agreement: –

Master Service Agreement is used when a company and a software vendor agree to work together on a project for a long time. It is generally used for IT outsourcing to avoid contractual disputes or potential legal action.  The agreement must include every crucial and minute detail to elucidate work description, financial guarantees, and client’s expectations etc.

Software Maintenance and Support Agreement: –

Under this agreement, core maintenance services and technical support for the software are included. Maintenance services are defined to cover the supply and/or application of upgrades and updates to the software being maintained. The service provider (IT firm) is expected to provide the services to a defined standard and may be given the right to suspend the services in the event of non-payment by the customer.

-Kiranpreet Kaur

Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali





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