If you’re retaining an app consultant for your business, you’ll want to have a written software consulting agreement in place to protect your legal rights while minimizing the risk there will be misunderstandings about what your consultant must do for your company.
So, what should you include in a software consulting agreement?
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Although the terms of each software consulting agreement may vary depending upon the project, here are some key issues you’ll want to address.
- Your Consultant’s Duties. These often are included in the contract under a section titled “Scope of Work” or “Statement of Work.”
- Performance Standards. What standards must your consultant meet both for rendering services and providing deliverables?
- Fees and Expenses. How much will you pay your software consultant? Will you reimburse expenses? If so, which expenses and what documentation must be supplied in order for reimbursement to occur? When and how are payments made? Are payments triggered by achievement of certain project milestones? If so, what are those milestones?
- Intellectual Property Ownership. Who owns the intellectual property created or used during the project? Will there be IP licensing involved? If so, what type of license will be granted?
- Confidentiality and Nondisclosure. In addition to protecting your company’s confidential information (trade secrets, etc.), you will need to decide the extent to which the existence of your relationship with the software consultant may be disclosed. Will you let your consultant reveal you are a client for purposes of marketing the consultant’s business to others?
- Non-Competition. Will there be any restrictions on the ability of your software consultant to compete against your company or do consulting work for your competitors? If so, what are those restrictions?
- Independent Contractor Status. To avoid potential liability for employment-related taxes and employer contributions to unemployment compensation and worker’s compensation, you’ll want to ensure that the software consultant agreement makes it clear that the consultant is working as an independent contractor rather than as your company’s employee.
- Subcontracting and Assignments. Can your consultant subcontract or assign any rights or obligations under the contract? If so, under what terms? Will there be restrictions on subcontractors and assignees, such as confidentiality and noncompetition provisions?
- Warranties. What warranties do you want your consultant to provide? Fitness for a particular purpose? A particular quality? Non-infringement on others’ intellectual property?
- Dispute Resolution and Remedies. How will disputes be handled and are there any limitations on remedies? Will you be heading straight to court for a material breach? Mediation and/or arbitration? What law governs?
- Indemnification and Defense. Will either party be required to indemnify or defend the other? If so, under what circumstances?
- Insurance. What type of insurance will be required? How much? What will you accept as proof of insurance?
- Term and Termination. When does the software consulting begin? When does it end? Are there renewable terms? Under what conditions can the contract be terminated early? For cause or without cause? Will there be any penalties for early termination without cause?
- Amendments. How can the contract be modified? Who has the authority to modify it?
Now, naturally these are not all of the terms and conditions you’ll find in an app consultant’s contract. However, they cover many of the major issues you’ll want to make sure you address.
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To get a software consulting agreement prepared for your business or have a contract professionally reviewed before you sign it, the next step is to schedule a phone consultation with Software Lawyer Mike Young.