Software development agreements

Software development agreements contain obligations on software developers to develop applications by making more than minor modifications to standard software or developing bespoke software that address the specific needs of the user.

Legal nature of software development contracts

Software development contracts are generally considered to be contracts for services, although upon reading § 651 German Civil Code, this is not immediately clear.

This paragraph provides that the laws on the sale of goods apply to the delivery of moveable goods to be manufactured or produced. In principle, Germany’s Federal Court of Justice qualifies software as a movable good. However, due to the statutory regime on performance guarantees and supplementary performance, the law on the sale of goods does not really reflect the nature of software development. Instead, it is the development process, which can often be long and arduous, as opposed to the simple performance of mutual obligations that is at the core of a software development relationship.

In the event that the contractual parties would prefer for the law on the provision of services to apply to a software development contract, it is important to expressly include such a provision in the preamble of the contract. The provision will not be decisive, but will act as an indication as to which rules the parties wish to govern the contract.

Important provisions

The software development agreement must clearly define the software to be developed. Often, a list of obligations is drawn up together with the client and will contain a precise description of the software’s specifications. In addition, the software developer must remember to grant the client a licence over the software. Finally, the contract should contain provisions concerning the time period for use (which should be at least “permanent use”) and remuneration for the developer.

In the event that the parties wish to derogate from the statutory provisions concerning liability for defects, express provisions should be included in the software development agreement.

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Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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