Lawsikho Blog

Learn how to draft a Software Development Agreement. What are the steps to be taken prior to entering into this agreement? What are the points of concern for both parties? What are the clauses to be included in the Software Development Agreement. Whether you’re a law student, a corporate lawyer, or a freelance legal professional, this guide will serve as a practical resource.

Introduction

Arjun thought he had found his missing piece.

Karan was sharp and enthusiastic and had that spark, who could turn Arjun’s vision into reality. They connected instantly at a startup mixer, where one casual coffee quickly turned into a brainstorming session. Their vision aligned, and the spirit felt right.

A few emails later, they were already sketching out features and timelines. But in all that jazz, they skipped one thing: the paperwork.

No contract. No NDA. No defined scope of work. Just a verbal understanding and a vague delivery date.

As the days turned into weeks, enthusiasm turned into silence. Arjun waited patiently for updates and code. But his messages remained unread. Deadlines slipped by. And then came the inevitable realisation:

No product. No accountability. No way to move forward.

What hit the most was not just the wasted time or effort; it was the helplessness. There was nothing in writing to hold anyone to their word. No agreement to fall back on. No legal footing to stand on.

I feel that having a Software Development Agreement (“SDA”) in place would have helped Arjun a great deal. It is a legally binding agreement that defines the roles, responsibilities, timelines, payment terms, intellectual property rights and confidentiality obligations between the developer and the client. 

Arjun was not the same after that experience. 

Since then, he made one non-negotiable rule: Nothing begins without an agreement.

Everything to be documented. Everything to be signed.

Because while you can’t prevent every setback, you can protect yourself from uncertainty or confusion. 

In today’s business set up, that kind of protection is not just clever, it is essential.

What is a software development agreement, and what does it entail? 

This time around, Arjun hires Nakul, but with a shield. 

Arjun, a founder of a health-tech startup, wants to build a mobile app that tracks medication schedules and alerts users to take their pills on time. He hires Nakul, a freelance software developer, to build it.

To avoid any confusion about timelines, payment, who owns the app, and what happens if the app doesn’t meet expectations, they sign an SDA. 

This SDA lays out:

• What Nakul will build (scope of work and purpose);
• How long will it take (the timeline);
• How much Arjun will pay and when (the payment terms);
• Who owns the app code and design (typically, Arjun, the client, will own the intellectual property);
• What happens if there is a delay or the work does not meet the expectations (the dispute resolution clause). 

Because of this SDA, both Arjun and Nakul know exactly what to expect and what they are responsible for. It not only clarifies and defines critical points but also provides legal protection in case things go downhill.

What should you do before you sign the agreement?

• Conduct a thorough due diligence
  Each party shall verify the legal status, financial stability, technical capability, any pending legal disputes that could materially affect the deal and prior experience of the other party.

If a party comes across something alarming at this stage, it may choose to back off right here. 

• Define project scope and objectives

The parties should mutually establish the software’s intended purpose, functionalities and expected outcomes.

• Draft a detailed scope of work (SOW)
  This shall form a preliminary understanding between the parties. It must enumerate deliverables, technical specifications, development phases and criteria of acceptance.
  
• Agree on commercial terms

The parties must agree on the total contract value, payment structure (e.g., fixed-fee or milestone-based), etc.

• Determine intellectual property rights
  Ownership of code, licenses, and derivative works should be clearly defined and documented.
  
• Establish a development timeline and milestones
  A detailed project schedule with deadlines, review periods, and delivery dates should be incorporated.
  
• Define support and maintenance obligations
  Discuss and specify post-deployment support terms, including bug fixes, updates, and service levels.
  
• Execute a non-disclosure agreement
  If confidential information is to be shared, first agree on what information should be categorised as confidential and then execute a non-disclosure agreement accordingly.
  
• Incorporate dispute resolution mechanisms
  Zero down on the governing law, jurisdiction, and preferred method of dispute resolution (e.g., mediation, arbitration).
  
• Obtain an independent legal review
  Without fail, both parties must get the draft of the agreement vetted by legal counsel to ensure it adequately protects their respective interests.

What was negotiated between the parties? 

Having burnt his hands once, Arjun, before bringing Nakul on board, approached a legal counsel not just to draft the agreement, but to ensure that every expectation, deliverable, and contingency was accounted for. 

What followed was the careful drafting of an SDA that was done keeping in mind the demands of their collaboration. Once the initial draft was prepared, Arjun had it thoroughly reviewed, refining its terms in light of practical considerations and potential risks, before moving ahead with Nakul’s formal engagement.

When Arjun presented the draft agreement to Nakul, the response was measured but candid. 

1. Arjun and Nakul, since the very beginning, addressed the elephant in the room. Both agreed that the ownership rights of the software shall vest with Arjun in its entirety. 
2. Arjun wanted to pay only upon satisfactory delivery, and Nakul needed timely payments for sustainability. Thus, payments were tied to successful milestone completion and written approvals, ensuring performance-based releases.
3. Arjun wanted assurance of defect-free software and support after delivery. Nakul didn’t want indefinite support obligations. Both the parties mutually agreed for a 3-month free support period, balancing Arjun’s need for reliability and Nakul’s operational limits.
4. Arjun wanted accountability in case of serious issues. Nakul feared unlimited financial exposure. Thus, the liability remains limited to the amount paid under the agreement and excludes indirect or consequential damages.
5. Arjun needed assurance that Nakul wouldn’t leak sensitive information. Nakul needed standard exclusions (e.g., public info). Thus, they incorporated a non-disclosure agreement with clear exclusions for pre-existing or public information.

How to draft a software development agreement? 

With this SDA, Arjun saved himself from a second fiasco. 

Let us learn how to draft one that vividly chalks out the purpose, obligations, payment terms, warranties, etc. 

SOFTWARE DEVELOPMENT AGREEMENT

At first, state the date and the place where the agreement is executed. 

Everything is in the name, at least when it comes to drafting contracts. Following the date and place, introduce the parties, that is, of the Software Developer and the Buyer, along with their respective registered addresses. If the parties are a company, do not miss or ignore including its successors and assigns. Trust me when I say this, you will save a lot of legal hassles by just putting in this extra sentence. 

This Software Development Agreement (“Agreement”) is entered into as of [Effective Date], by and between:

Party 1: [Buyer name],
a company incorporated under the Companies Act 2013, having its registered office address at [insert address] (“Software Developer”) (which expression, unless it be repugnant to the context or meaning thereof, shall be deemed to mean an included successor and assigns) 

Party 2: [Developer name],
a company incorporated under the Companies Act 2013, having its registered office at [insert address] (“Buyer”) (which expression, unless it be repugnant to the context or meaning thereof, shall be deemed to mean an included successor and assigns).

WHEREAS

This is the recital clause of the agreement. The purpose of this is to identify the parties and their roles and to confirm mutual consent. gy

1. The Software Developer is engaged in the business of information technology consulting, software development, marketing, and licensing of software. The Buyer is a health care startup that is engaged in the business of building a mobile app that tracks medication schedules and alerts users to take their pills on time
2. A Software Developer has agreed to develop for the Buyer and the Buyer has agreed to purchase from the Software Developer the computer software as per the requirements of the Buyer and having the capabilities and functions more particularly set forth in this agreement with the functional specification as more particularly described in the schedule hereunder written on the terms and conditions recorded in this agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:

1. DEFINITIONS 

This is an extremely pivotal clause of any agreement. Define key terms that you think require interpretation and a detailed explanation, like in this case, it could be a project, software, payment schedule, etc. 

It is pertinent to note that once a term is defined within the agreement, it must be consistently capitalised throughout the document to maintain clarity and legal precision. For example, if the term Software is defined, it should be referred to as Software capitalised everywhere else in the agreement. 

NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY MUTUALLY

2. PURPOSE OF THE AGREEMENT

This clause aims to provide clarity, context and legal grounding for the rest of the agreement. 

1. The Buyer desires to retain the Software Developer as an independent contractor to develop the computer and mobile Software with the functional specifications as more particularly described in the Schedule hereunder written. The Software Developer is ready and willing and able to undertake for the Buyer, the development of such software and agrees to do so on the terms and conditions set forth in this Agreement.
2. The Software Developer has agreed to design, develop and provide such Software and in consideration thereof, the Buyer has agreed to pay to the Software Developer the amounts, more particularly set out below.

2. OBLIGATIONS OF THE SOFTWARE DEVELOPER

What exactly is expected out of a software developer? List it out here. 

This clause aims to define expectations, ensure accountability and build professional trust. 

It is agreed that the Software Developer will provide to the Buyer the services mentioned below with the ultimate aim of developing and providing the software with the specifications as required by the Buyer. The Software Developer shall:

1. Design, develop and provide the Buyer with the software according to the functional specifications and related information incorporated with the specifications as more particularly set forth in this Agreement.
2. To report all findings and make all recommendations directly to the management of the Buyer.
3. Engage and utilise the services of employees and/or contractors capable of designing and implementing the Software to be developed as per this Agreement.
4. Arrange for such employees and/or contractors, if any, to execute and deliver any document or instrument reasonably requested by Buyer to reflect Buyer’s ownership of the Software. 
5. To deliver to the Buyer the Software not later than (insert a date), which shall include all versions either in source code or object code format.
6. Not to disclose any confidential information of the Buyer to any third person that might come into the Software Developer’s possession during the performance of its obligations under this Agreement. 
7. The Software Developer must, in compliance with the Digital Personal Data Protection Act 2023, require that adequate security measures are taken to ensure security measures and comply with the said Act. 
8. Make best efforts to hold confidential information in the strictest confidence; not to make use of it other than for the performance of its obligations hereunder, and shall release it only to the Software Developer’s employees or contractors. 
9. From time to time, provide proper training to the Buyer and its employees for using the Software, at no additional cost. 

3. OWNERSHIP OF SOFTWARE

Clarity on ownership of intellectual property is indispensable if you wish to avoid disputes. 

So it is important to answer the question about who shall own it? Who shall own the trademark, patents and copyrights (as applicable) once the software is developed?  

1. The Software Developer hereby agrees that after the Software is developed and handed over to the Buyer, on or before the date as specified under this Agreement (and mutually extended, if any), the software shall be the sole property of the Buyer.
2. Software Developer hereby assigns to the Buyer, without further compensation, all of its right, title and interest in and to the Software and any and all related patents, patent applications, copyrights, copyright applications, trademarks and trade names related thereto.
3. The software developer will keep and maintain adequate and current written records with respect to the software (in the form of notes, sketches, drawings, and as may otherwise be specified by the Buyer), such recordings are to be available to and to remain the sole property of the Buyer.
4. All versions of the Software shall contain the Buyer’s conspicuous notice of copyright. 
5. Upon request and at the Buyer’s cost and expense, the Software Developer agrees to execute all applications, assignments, instruments, and other documents, and to perform all acts as may be reasonably required by the Buyer to assign, convey, and fully transfer to the Buyer all rights, title, and interest in and to the Software. This includes enabling the Buyer, or its successors, assigns, or nominees, to secure and enjoy the full and exclusive benefits of such rights.
6. The Software Developer further agrees to cooperate with the Buyer, at the Buyer’s expense, in the procurement, registration, maintenance, and enforcement of patents, copyrights, and any other legal protections available for the Software in any jurisdiction worldwide.

4. PAYMENT TERMS

Think of a situation where you had verbally agreed on a specific amount to be paid to the Software Developer. Once the work is completed, the developer unexpectedly demands a higher payment, citing additional effort, unforeseen complexities, or out-of-pocket expenses. This is what I call a recipe for unnecessary confusion and conflict. 

And that is exactly why payment terms must be stated clearly. As clear as a crystal. 

This ensures transparency, avoids disputes, and protects both parties financially by setting expectations for compensation, milestones and consequences for late or non-payment.

1. The Buyer agrees to pay the Software Developer the total sum of Rs. [insert amount] for the services provided under this Agreement.
2. Payment will be made in the following manner:

• [X]% upon execution of this Agreement.
• [X]% upon delivery of the final product and acceptance by the Buyer.

3. Payments are due within [30] days of receipt of an invoice from the Developer.
4. With prior approval, the buyer will also reimburse the software developer for all reasonable out-of-pocket expenses, including but not limited to airfare, lodging, meals, and rental of automobiles incurred by the software developer during the development of the software on behalf of and for the buyer, if any, of these activities are deemed necessary. 
5. The payment of the entire consideration amount shall be the essence of this agreement and of the passing over of the rights of the software in favour of the Buyer.

5. INDEPENDENT CONTRACTOR

This  section is to clarify that the position of a Software Developer is not of an employee, protecting the Buyer from tax, liability, and legal obligations. It also prevents either party from making commitments on behalf of the other.

The Software Developer is acting as an independent contractor with respect to the services to be provided to the Buyer. Neither the Software Developer nor the employees of the Software Developer performing services for the Buyer shall be considered employees or agents of the Buyer. The Buyer shall not be responsible for the Software Developer’s acts or the acts of his/her employees while performing services under this agreement. Nothing contained in this agreement shall be considered to imply a joint venture, business partnership, or principal-agent relationship between the parties, and neither party, by virtue of this agreement, shall have any right, power, or authority to act or create any obligation expressed or implied on behalf of the other party. 

6. LIBERTY FOR MODIFICATION 

This clause entitles the Buyer to request changes during development while ensuring any added costs or delays are discussed and mutually agreed upon, protecting both parties.

The Buyer may, in its sole discretion, request that changes be made to the specifications or other aspects and tasks associated with this agreement and related to the software. If the Buyer requests such a change, the Software Developer will use its best efforts to implement the requested change at no additional expense to the Buyer and without delaying delivery of the software. In the event that the proposed change, in the reasonable opinion of the Software Developer, will require a delay in delivery of the Software or would result in additional expense to the Buyer, then the Buyer and the Software Developer shall mutually confer and the Buyer shall, in its discretion, elect either to withdraw its proposed change or require the Software Developer to deliver the software with the proposed change and subject to the delay and slash or additional expense. 

7. CONFIDENTIALITY 

Remember the case of the Winklevoss twins? 

So the Winklevoss twins engaged Mark Zuckerberg to assist in developing their social networking site. Without any confidentiality agreement in place, they shared their ideas and plans openly with him. Subsequently, Mark launched “the Facebook,” which had significant similarities to the Winklevoss twins’ social networking site. The twins initiated legal action against Mark. However, the absence of an NDA complicated their legal position, making it challenging to prove the misuse of confidential information. The dispute was eventually settled, but not without a prolonged legal battle that could have been mitigated with a well-drafted NDA. 

I hope this explains why a confidentiality clause is a must in an agreement. 

1. The Software Developer acknowledges that all material and information supplied by the Buyer, which has or shall come into the Software Developer’s possession or knowledge of the Software Developer in connection with performance of the obligations hereunder, is to be considered the Buyer’s confidential and proprietary Information (“the Confidential Information“). The Confidential Information includes the Software, trade secrets, processes, data, know-how, programme codes, documentation, flowcharts, algorithms, marketing plans, forecasts, unpublished financial statements, budgets, licenses, prices, costs, and employee and customer lists. The Software Developer’s undertakings and obligations under this Section, however, shall not apply to any Confidential Information which:

(i) is or becomes generally known to the public through no action on the Software Developer’s part,

(ii) is generally disclosed to third parties by the Buyer without restriction on such third parties, or

(iii) is approved for release by the written authorisation of the Buyer. 

2. Upon termination of this Agreement or at any other time upon request, the Software Developer will promptly deliver to the Buyer all notes, memoranda, notebooks, drawings, records, reports, files, documented source codes and other documents (and all copies or reproductions of such materials) in its possession or under its control, whether prepared by the Software Developer or others, which contains Confidential Information. The Software Developer acknowledges that the Confidential Information is the sole property of the Buyer. The Software Developer agrees that disclosure of such information to, or use by, third parties, either during or after this Agreement, will cause the Buyer irreparable damage. The Software Developer agrees to use best efforts to hold Confidential Information in the strictest confidence, not to make use of it other than for the performance of its obligations hereunder, to release it only to the Software Developer’s employees or contractors who need to know such information for the purposes of this Agreement and not to release or disclose it to any other party. The Software Developer further agrees not to release such information to any employee or contractor who has not signed a written agreement between the Software Developer and the employee. Such an agreement must expressly bind the employee not to use or disclose the confidential information, except as expressly permitted in this Agreement. The Buyer shall be listed as a third-party beneficiary of any such agreement.
   
3. The Software Developer acknowledges that the Buyer’s purpose in pursuing the development of the Software is to gain a significant competitive advantage over its competitors operating without such Software and that such advantage shall be jeopardised if such competitors learn of the Buyer’s negotiations with the Software Developer or the performance by the Software Developer of its obligations here under. Accordingly, the Software Developer agrees to keep such negotiations and performance of its obligations hereunder strictly confidential and not to discuss any information to any third party or entity without the prior written permission of the Buyer. In no event, the Software Developer or any of its employees use the Buyer as a reference in marketing the Software Developer’s services to any third party or entity without the Buyer’s prior written permission. 

8. TRAINING

This clause ensures the Buyer’s team can properly use and manage the software. It helps with smooth handover, reduces dependency on the Developer, minimises user errors, and cuts support costs. 

The Software Developer shall provide the Buyer and its employees with training consultations with respect to the use of the Software as may reasonably be requested by the Buyer after acceptance at no additional costs to the Buyer from time to time (“Training Period”). The Software Developer shall deliver a detailed user manual to the Buyer on or before completion of acceptance that will enable the Buyer’s employees who are otherwise unfamiliar with the Software to become adequately informed about using the Software. All training that the Software Developer is required to provide hereunder shall be performed at such locations and at such times as are mutually agreed to by the parties hereto.

9. SUPPORT SERVICES

At some point in our lives, we have all been ghosted by our “IT guys”. This clause endeavours to prevent such a situation by contractually obligating the Developer to provide ongoing support services even after the software has been delivered to the Buyer.

Upon expiration of the Training Period and following the Buyer’s request, the Software Developer shall provide any support services necessary to ensure the Buyer’s continued use of the Software. Such services shall be performed by the Software Developer at a cost as mutually decided between the Buyer and the Software Developer.

10. WARRANTIES

Think of it this way. 

You buy a mixer-blender from GoBlend. The company said, “If the machine or any part, including the jars, gets damaged or breaks within 6 months from the date of purchase, we’ll replace/fix it for free.” 

This same concept applies here. In software, a warranty means the developer promises to fix problems in the software for a set time after it’s delivered. This clause helps protect the buyer from faulty or substandard software and ensures that the developer delivers reliable and tested software. 

1. The Software Developer warrants that for a period following acceptance, the Software shall operate substantially according to the specifications. In the event of any breach of the warranty, in addition to any other remedy to which Buyer may be entitled, the Software Developer shall take all action necessary at its expense to cause the Software to operate according to the warranty.
2. The Software Developer warrants that the Software shall not infringe upon any copyright, patent, trade secret or other intellectual property interest of any third party. The Software Developer shall indemnify and hold the Buyer harmless from and against all such infringement claims, losses, suits and damages including, but not limited to, attorney’s fees and costs, and shall promptly following any bona fide claim of infringement correct the Software so as not to be infringing, or secure at its own expense the right of the Buyer to use the Software without infringement.

11. TERMINATION OF THE AGREEMENT

This clause gives clarity on what can trigger an early end and helps parties avoid legal disputes by laying down a structured exit.

1. This Agreement shall commence upon today’s date and continue until all of the obligations of the parties have been performed or until earlier terminated as provided herein.
2. Software Developer’s appointment as consultant pursuant to this Agreement and this Agreement shall terminate upon the occurrence of any of the following events:

1. In the event either party defaults in any material obligation owed to the other party pursuant to this Agreement, then this Agreement may be terminated if the default is not cured or remedied following at least forty-five (45) days’ written notice to the defaulting party.
2. Either party is wound up by the Orders of any Court of Law, or liquidation proceedings are instituted against a party and the proceedings are not dismissed within forty-five (45) days after commencement.
3. The ownership of the software and confidentiality shall survive the expiration or termination of this Agreement. In the event of early termination due to the Software Developer’s default or the death or disability of the individual(s) identified in sub-section (iii) above, the Software Developer agrees to deliver the Software then completed. The Software Developer, in that instance, shall be paid a pro rata share for the work; if the amount cannot be agreed upon, the Buyer can return the work, and the other terms of this contract go into effect, as outlined in this section and others.

12. LIMITATION OF LIABILITY

You think a software developer should be held liable for missing a deadline caused by a nationwide lockdown due to a pandemic?

Does not sound fair, right? 

Such a scenario qualifies as a force majeure event, pausing obligations without penalty if the contract includes such a clause.

1. The Buyer shall proceed with its usual care in preparing, selecting and transmitting documentation, information and/ or improvements to the Software Developer. However, the Buyer shall not be responsible for any bona fide oversight which may occur despite such care.
2. Neither party to this Agreement shall be liable for any failure or delay on its part in performing any of its obligations under this Agreement or for any losses, damages, costs, charges or expenses incurred or suffered by the other party by reason of such failure or delay, if and so far as such failure or delay shall be the result of or arising out of force majeure.

What is a force majeure event? And what is the purpose of this clause in a contract? 

A force majeure event is an unforeseeable and unavoidable event which is beyond the control of either party. Such events prevent one or both parties from fulfilling their contractual obligations. Events such as natural disasters, war or terrorism, epidemic or pandemic, strikes or labour disturbance, etc, are classified as force majeure events. 

Its purpose is to protect parties from liability if they cannot perform due to such extraordinary events. For example, if the Software Developer cannot deliver the deliverables on time because of a nationwide lockdown, the force majeure clause may excuse the delay.

13. AGREEMENT TO BE EXECUTED IN DUPLICATE

This shall ensure that both parties have original agreements. 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and the said counterparts shall together constitute this Agreement.

14. ARBITRATION

Clients usually prefer judges who “speak the language of their dispute”. In technical agreements, such as this, arbitration allows the parties to appoint an arbitrator with relevant technical expertise, someone who can quickly grasp and assess the nuances of the matter. This is a key reason why parties often choose arbitration.

Any dispute, controversy, or claim arising out of or in connection with this Agreement, including its interpretation, breach, termination or validity, shall be referred to and finally resolved by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, as amended from time to time.

The arbitration shall be conducted by a sole arbitrator, mutually appointed by the parties. If the parties are unable to agree on an arbitrator within 30 days of a dispute being notified, the arbitrator shall be appointed in accordance with the Act.

The seat and venue of arbitration shall be Mumbai, and the proceedings shall be conducted in English.

The arbitral award shall be final and binding on both parties and enforceable in any court of competent jurisdiction in India. Each party shall bear its own costs, and the arbitrator’s fees shall be shared equally, unless otherwise directed by the arbitrator.

15. JURISDICTION 

To avoid confusion with respect to the seat and venue of arbitration, the parties hereby agree to approach the courts in Bombay whenever court intervention is needed. 

Courts at Mumbai alone shall have jurisdiction over all matters arising out of, concerning with or touching upon this Agreement to the exclusion of all other courts.

16. NOTICES

This clause clearly defines how, when, and to whom official communications (like termination, breach notices, or updates) must be sent between the parties.

Any notice or other communication of like nature that may be given by one party to the other shall always be in writing in English/Hindi/Marathi language and shall be served by hand delivery, duly acknowledged or sent by Registered Post with acknowledgement due or through electronic mode. Any such communication shall be deemed to have been served when sent by Registered Post when the same is actually received by the addressee. There shall be deemed acceptance of the communication in case of refusal/evasion of service of the communication.

17. ADDRESS OF THE BUYER AND SOFTWARE DEVELOPER FOR SERVICE 

State the addresses for delivery of notice or such other communication. 

SOFTWARE DEVELOPER

(Address of the Software Developer)

THE BUYER

(Address of the Developer)

18. NO WAIVER

The purpose of this clause is to protect both parties by making clear that a delay or failure to act does not equal giving up legal rights, allowing them to enforce the agreement later if needed.

The waiver or failure of either party to exercise any right in any respect provided in this Agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled. 

19. ENTIRETY OF AGREEMENT

This clause ensures that only what is written in the agreement is legally binding, overriding any prior discussions or informal understandings. 

The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement. There is no written or oral understanding directly or indirectly related to this Agreement that is not set forth herein. No change can be made to this Agreement other than in writing and signed by both parties.

20. LEGAL CHARGES

It is in the best interest of both parties that an understanding with respect to legal charges is recorded. 

Each Party shall bear and pay its legal charges. 

21. GOVERNING LAW

This is very much relevant when the transactions are cross-border or interstate. This clause ensures clarity by specifying which country’s laws apply and which courts will handle any disputes.

This Agreement shall be governed by and construed in accordance with the laws of India. The parties agree that any disputes arising under or in connection with this Agreement shall be subject to the exclusive jurisdiction of the courts located in Mumbai. 

THE SCHEDULE ABOVE IS REFERRED TO 

   (State particulars of specification of the software here)

Hereafter, the parties shall execute the agreement by affixing their signature. When a company is a party to this agreement, the signing authority shall also produce a Board Resolution authorising such a person to execute the agreement. 

IN WITNESS WHEREOF, the parties herein have hereunto set and subscribed their respective hands at written.

THE COMMON SEAL of the within-named

PARTY 1

“THE SOFTWARE DEVELOPER”

was hereunto affixed pursuant to

The Resolution of its Board of Directors [insert date of the resolution]

Passed on that behalf on ____

Day of ____ 2025 by its Director in the presence of

1. [Names and signatures of witness] 
2. [Names and signatures of witness]

THE COMMON SEAL of the within-named

PARTY 2 

“THE BUYER”

was hereunto affixed pursuant to

The resolution of its Board of Directors 

[insert date of the resolutions]

Passed on that behalf on ____

Day of ____ 2025 by its Director in the presence of

1. [Names and signatures of witness] 
2. [Names and signatures of witness]

Final thoughts

Why is a well-drafted software agreement so important? 

An SDA is more than just a legal document; it is the foundation of a successful software project. In a domain where technology evolves rapidly and expectations shift frequently, the SDA acts as a roadmap that aligns the interests of both the Buyer and the Developer.

A well-drafted SDA ensures clarity on key issues such as the scope of work, ownership of intellectual property, payment schedule, confidentiality, warranties, and support services. It minimises ambiguity, protects against scope creep, and provides a structured process for handling modifications and disputes.

Importantly, it also enables proactive risk management, with carefully negotiated clauses on termination, delays, limited liability, and force majeure. When disputes arise, mechanisms like arbitration allow for resolution by experts who understand the technical nuances.

Ultimately, an efficient SDA helps avoid the costly consequences of miscommunication and failed expectations. It safeguards your investment, protects your rights, and gives both parties a platform to focus on what matters most: delivering a successful, high-quality software product.

FAQs

1. Can the Buyer insist on audit or inspection rights during the development process?

Yes, especially in long-term or high-value contracts. The agreement can grant the Buyer rights to periodically audit the development progress, security practices, or even the code repository, subject to confidentiality obligations.

2. How are post-deployment obligations handled in the SDA?

The SDA should clearly distinguish between development, implementation, warranty, and support phases. A separate annexure or Service Level Agreement (SLA) can be included for maintenance and bug fixes beyond the warranty period.

3. Is arbitration preferable for resolving disputes in software contracts?

Often yes. Arbitration allows the parties to appoint a qualified arbitrator who understands the technical aspects of this transaction software lifecycle, methodologies, and IP frameworks, ensuring a quicker, more informed resolution than traditional courts.

4. Can the Developer retain general know-how and techniques after project delivery?

Generally, yes. The SDA may assign ownership of the specific deliverables to the Buyer, while allowing the Developer to retain general skills, methods, and non-confidential tools, unless expressly restricted.

5. What are the stamp duty and registration implications of an SDA?

Stamp duty is payable based on the value of the agreement and the state-specific schedule. While registration is not mandatory, proper stamping is crucial for admissibility in court. The quantum of duty changes frequently and must be verified at the time of execution.

      6. Who owns the software developed under the agreement?

Ownership depends on the terms of the agreement. Typically, the buyer owns the final software if there’s a clear assignment of intellectual property. If not, the developer may retain certain rights, especially to tools or libraries used.