How to choose a software development contract

  • Tutorial
In practice, we often have to deal with various software contracts . Typically, a contract for the provision of services, a contractor agreement or an author’s order agreement (author’s agreement) are used to place an order for the development of software products.

Which one is correct and what is the risk of a mistake when choosing a contract?

Service agreementin principle, it is not suitable for this role, since its subject is the implementation of certain activities, and not the creation of software and the transfer of rights to it. Services by definition are sold and consumed in the process of their provision and do not have material expression. Of course, as a result of the provision of services, software may also be created, but such activity is secondary and, accordingly, the customer’s rights to such software are not adequately protected under the contract for the provision of services.

In contrast to a service contract, the possibility of using a contract for the development of softwareexpressly provided for in Article 1296 of the Civil Code of the Russian Federation. The subject of such an agreement is the performance on the instructions of the customer of certain work to create specific software. The result of work, unlike services, is always a certain material object. In this case, this result is software with the necessary characteristics for the customer.

Thus, the contract for the creation of software is mainly aimed at developing such software in strict accordance with the requirements of the customer set forth in the technical documentation, and its subsequent transfer to the customer. Here, the performer is focused on the result, rather than the implementation of imitationactivities. In addition, since the contract is aimed at transferring the developed software to the customer, at the same time the exclusive right to custom software passes to the customer as a result of intellectual activity, unless otherwise provided by agreement of the parties.

A copyright contract can also be used to create software. However, unlike the contract for the development of software, the author’s contract is concluded directly with the author, i.e. an individual.

Since the author, as a person whose creative work creates software, is traditionally considered to be the weaker side of the transaction than the customer, the legislation provides him with a number of advantages (see Articles 1288 - 1290 of the Civil Code of the Russian Federation). In particular, under an author’s contract, software rights do not automatically transfer to the customer, but are retained by the author. Therefore, the provisions on the transfer of rights to the software in full must be explicitly included in the contract of copyright.

However, this does not mean that in the case of working with a freelance programmer, it is better to conclude a contract. On the contrary, such an agreement may be challenged, because the law explicitly provides for a different relationship with the author, which initially provides the customer with fewer benefits.

If earlier there were still disputes between lawyers on this issue, then from September 1, 2014, the article on the work contract for the creation of works was specially supplemented with paragraph 5, which explicitly states that the rules of this article do not apply to contracts in which the contractor (performer) is the author of the work.

Thus, when choosing a contract design, it is necessary to pay attention to the following points:
1) what is the direct subject of the order, and
2) who is on the side of the contractor.

If the subject of the order is specific software, the service contract is not suitable, because the latter is aimed at activities of a certain kind, in which the result has a secondary role. Accordingly, there remains a contract for the creation of works and a contract of copyright order.

If a natural person (author) is hired as an executor, including in the status of an individual entrepreneur, the contract is no longer valid. the law expressly indicates the necessity of concluding a copyright contract in this case.

What risks do the parties bear in case of an error in concluding a contract?

In such a situation, adverse consequences arise primarily from the customer, who relied on the fact that the signed contract is final and protects it in full.

However, when concluding a contract for the provision of services, the contractor, based on the law, has the right to demand an additional payment for the alienation of software rights transferred to the customer. The author can do likewise when concluding a contract with him instead of the contract of copyright.

Therefore, be careful when choosing a contract for software development, as an error may cost you the rights to such software or additional costs.

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