Computer Contracts

PROFESSIONAL
PRACTICES
“COMPUTER
CONTRACTS”
CONTENTS
• What is a Contract
• Contact for the supply of custom built software
• Other types of software services contract
WHAT IS A CONTRACT
• A contract is an agreement between two or more persons

creating rights & duties and which is enforceable by law.
• A contract is a promise or set of promises that are legally
enforceable and, if violated, allow the injured party access
to legal remedies.
• An agreement between persons which obliges each party to
do or not to do a certain thing.
WHAT IS A CONTRACT
• Contracts
• Setout the agreement between the parties
• Setout the aim of the parties
• Provide rules for the issues arising while contract is running
• Ways of terminating the contract
• Consequences of termination
WHAT IS A CONTRACT
“While optimists make the best deal makers, pessimists

make the best contract writers”
Hilary Pearson
WHAT IS A CONTRACT
• A contract
• Should be set out in a clear and logical manner
• should be complete and consistent
• Should have no ambiguity
• Should be free of doubts regarding the rights and duties of concerned
parties
WHAT IS A CONTRACT
• There are four types of contractual arrangement which are

widely used in connection with the provision of software
services
• Contract hire
• Time and materials
• Consultancy
• Fixed price
CONTRACTS FOR THE
SUPPLY OF CUSTOM-
BUILT SOFTWARE AT A
FIXED PRICE
STRUCTURE OF THE
CONTRACT
• A short introductory section
• A set of standard terms and conditions
• A set of appendices or annexes
THE INTRODUCTORY SECTION
• The introductory section states that it is an agreement

between the parties whose names and registered addresses
are given.
• It is dated and signed by the authorized representatives of
the parties.
WHAT IS TO BE PRODUCED
• Contract must state what is to be produced.

• Two level references is normally used.
WHAT IS TO BE DELIVERED
• Producing software is not simply handing over the text of

program.
• Some other possibilities are
• Source code
• Command files for building the executable code from the source and
installing it.
• Documentation of the design and code.
• Different manuals
• Test data and test results
OWNERSHIP OF RIGHTS
• Contract should state what legal rights are being passed by

the software house to the client under the contract.
CONFIDENTIALITY
• Confidentiality is the protection of personal information.

Confidentiality means keeping a client's information
between you and the client, and not telling others including
co-workers, friends, family, etc.
• It should be highly considered while writing a contract.
PAYMENT TERMS
• Standard terms and conditions will specify the payment

conditions like
“payment shall become due within thirty days of the date of
issue of an invoice. If payment is delayed by more than thirty
days from due date, the company shall have the right to
terminate the contract or to apply a surcharge at an interest
rate of 2 per cent.”
CALCULATING PAYMENTS FOR
DELAYS AND CHANGES
• The contract should make provision for payments to
compensate the wasted efforts.
• It must specify the process by which these extra payments
are to be calculated.
PENALTY CLAUSES
• Delays caused by suppliers are handled by penalty clauses.

OBLIGATIONS OF THE CLIENT
• When work is being carried out for a specific client, the

client will have to fulfil certain obligations, if the contract is
to be completed successfully.
SOME OTHER SECTIONS OF A
CONTRACT
• Standards and Methods of Working
• Progress meetings
• Project managers
• Acceptance procedure
• Warranty and maintenance
• Indemnity
• Termination of the contract
• Arbitration
• Inflation
• Applicable law
CONTRACT HIRE
CONTRACT HIRE
• Contract hire agreements are very much simpler than fixed

price contracts.
• Reason is the much less involvement and responsibility of
supplier.
TIMES AND
MATERIALS
TIMES AND MATERIALS
• It somewhere lies between a contract hire agreement and

fixed price contract.
• The supplier agrees to undertake the development of the
software in much the same way as in a fixed price contract,
but payment is made on the basis of the cost incurred, with
labor charged in the same way as for contract hire.
CONSULTANCY
CONTRACTS
CONSULTANCY CONTRACTS
• Use of consultants is now widespread in both private and

public body.
• Consultancy projects are usually undertaken for a fixed
price but the form of contract is very much simpler.
LIABILITY FOR
DEFECTIVE
SOFTWARE
LIABILITY FOR DEFECTIVE
SOFTWARE
• There are laws present to ensure the quality of products and
goods delivered to a customer.
• Quality of goods include their
• State and condition
• Fitness for all required purposes
• Freedom from minor defects
• Safety
• durability
LIABILITY FOR DEFECTIVE
SOFTWARE
• A major difficulty in the case of software is that whether it
comes under the category of goods or not.
• Only statement available for the software is
“it must be written with reasonable skill and care”
• To overcome this difficulty, guarantee clauses are often
drafted in the contracts.

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PROFESSIONAL

• A contract is an agreement between two or more persons

“While optimists make the best deal makers, pessimists

• There are four types of contractual arrangement which are

• The introductory section states that it is an agreement

• Contract must state what is to be produced.

• Producing software is not simply handing over the text of

• Contract should state what legal rights are being passed by

• Confidentiality is the protection of personal information.

• Standard terms and conditions will specify the payment

• Delays caused by suppliers are handled by penalty clauses.

• When work is being carried out for a specific client, the

• Contract hire agreements are very much simpler than fixed

• It somewhere lies between a contract hire agreement and

• Use of consultants is now widespread in both private and

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