ICT Contracts require specialist skills
AV Commercial Lawyer Michael Smith worked for over a decade in the ICT (Information and Communications Technology) industry before entering a career in law. He regularly encounters practitioners in the legal industry attempting to prepare and negotiate ICT contracts without understanding basic ICT concepts, or the commercial concerns that a business operating in that space would have. In this article, Michael demonstrates from four simple examples how understanding ICT issues allows him to provide real value to clients.
Picture this, you are a software developer who has been approached to develop an app. The app allows users to enter their symptoms and then determines what their medical issue might be.
The client provides their “standard” supplier contract which includes these provisions:
• You will be paid on final acceptance of the app;
• You indemnify the client against any loss or damage;
• You guarantee performance; and
• You assign intellectual property (IP) to your client.
Your lawyer takes a look over the contract and thinks that looks fair, after all, you’re the app developer, you should be able to make those commitments.
You sign the contract, start development and think all is well.
Unfortunately, you have opened yourself to significant risk, in areas over which you may have little control.
1. Payment on Acceptance
Has this ever happened:
a. You prepare the first version of the app;
b. You send it to the client for input;
c. and wait;
d. and wait;
e. and wait;
f. while your bills pile up.
It would have been better to have milestone or monthly payments, allowing you to be periodically paid for work completed.
Imagine a user types in their symptoms, hits submit and gets told they have African Trypanosomiasis, despite never having been anywhere near an African tsetse fly. They panic, order expensive tests, which come back negative and promptly sue your client.
Your client then tries to pass liability on to you, even though you know nothing about African Trypanosomiasis or its symptoms.
Had the indemnity clause been balanced, ensuring that the client was liable for any medical content, you could well be off the hook.
3. Guarantee of Performance
As anyone who has spent any time working in IT knows, technology frequently fails. It is not possible to give a blanket guarantee that it will work. What you might promise is that the app will work substantially in accordance with specifications, and that you will offer free tech support for a set period of time (and remember to factor this into your price).
It is also a good idea to only guarantee performance on devices above minimum specifications, to avoid complaints when someone tries to get the app working on their iPhone 3.
4. Full Assignment of Intellectual Property
It is not uncommon for software developers to reuse previous code for new pieces of software. This is all well and good, however can create issues if you have effectively assigned that code to your client.
You could find yourself disentitled to use the code, or having to pay royalties.
Rather you should grant the client a non-exclusive licence to use the code, or exclude your background IP from the assignment.
If you have a commercial agreement that might benefit from Michael’s industry knowledge, he would love to hear from you.