A product development agreement contract protects you and your work, as well as helps you obtain the final product you may want. For example, if you are paying someone to develop software, you will want to draft a software development agreement to make sure you get the edition you want. Additionally, the agreement helps the designer by addressing and resolving disputes and aiding you in getting paid. If your agreement is well written, it can:

  • Establish both parties legal duties
  • Describe the rights and obligations of all involved parties
  • Help improve communication by establishing expectations

Work Phases: When Will Work Be Completed?

One part of a product development agreement that is a frequent area of dispute is the timeline in which work will be completed. To avoid these issues, make sure a schedule with listed benchmarks is agreed upon at the beginning of the relationship. For best results, you will want to break down the project into stages or phases.

You should state in the agreement what is considered an acceptable product at the end of each milestone period and what amount will be paid at each stage. This will allow both parties to monitor progress and address any issues as they occur.

There are advantages for parties on both sides of the agreement. For the client getting the product, the work phases will reduce the risk of the client ending up with a final product they are not satisfied with. There are also advantages to the party developing the product. By creating the agreement with milestones, you avoid possible claims of unsatisfactory work or nonperformance. Additionally, you will know about any changes the customer wants before the product is completed. You will also receive payment at the milestones, which reduces your risk of not being paid.

Software Specifications: Importance of Details

When creating a software product, the specifications are akin to the blueprints a builder would use. It is essential to draft as complete specifications as possible. This will reduce the risks of misunderstandings and lessen the risk of:

  • Nonpayment
  • Client dissatisfaction
  • Possible litigation

Specifications can be written in many different ways. One way to create one is by drafting what is referred to as a functional specification, which explains the process to the client without using highly technical language. Along with this, the developer may provide the client with a prototype to demonstrate the product.

Payment Arrangements

Your agreement should clearly define the payment arrangements that both parties are agreeing to. In the example of a custom software designer, there are two ways they can be paid:

  • Time and materials: This type of payment arrangement is often referred to as an hourly rate. In this type, the developer will bill for the time they spent working on the software, as well as all the actual costs that went into the creation process. This is often the option chosen by developers, as it assures them payment even if the job takes longer than anticipated.
  • Fixed price: In a fixed-price arrangement, the developer is paid in one lump sum. This type of payment arrangement is usually favorable to a client, as they will know how much they will have to pay no matter how long the project actually takes. However, even with a fixed-price payment method, many clients will pay additional money to the developer if the project requires extra work to ensure it is not completed hastily.

Transfer of Copyright Ownership

Another essential section of a software development agreement is establishing who will own the intellectual property once the work has been created. It is this section that often causes may problems between clients and developers and can sometimes even be a deal-breaker.

Typically, a developer will retain the copyright to the software they create unless they are considered an employee of the company or the work is part of a larger project. If the client agreement includes ownership, they will need to have a transfer of ownership from the developer.

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