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Agreement for Development of Software to Specifications

THIS AGREEMENT, made and entered into this [date] by and between [name] (Developer), a corporation duly organized and existing under the laws of [state], and [name] (Customer), a corporation duly organized and existing under the laws of [state]:


WHEREAS, Developer has acquired specific expertise in the development of application software in the field of [nature of field];

WHEREAS, Customer has a need for certain application software as hereinafter identified;

WHEREAS, Developer is ready, willing, and able to undertake the development of such software and to grant Customer a license to utilize same on the terms and conditions set forth herein; and

WHEREAS, Customer desires to have developed and to acquire a license to utilize such software on the terms and conditions set forth herein:

NOW THEREFORE, in consideration of the premises as well as the obligations herein made and undertaken, the parties, intending to be legally bound, agree as follows:

Article I


1.01 Development Undertaking. Developer shall, within [number] days of final execution of this Agreement, commence work upon and diligently proceed with the development of the Subject Programs according to and in conformity with the specifications and performance standards set forth in Exhibit A hereto (Specifications and Performance Standards) [omitted]. The term "Subject Programs" shall be deemed to include all error corrections, modifications, and enhancements made thereto. The term "Enhancements" shall mean revisions to or new functions of the Subject Programs that are developed under the Enhancements Development Addendum, executed by the parties hereto.

1.02. Development Budget and Timetable. Developer shall commit and utilize sufficient resources to meet the milestones and to complete development of the Subject Programs within the development timetable set forth in Exhibit B hereto [omitted] and within the development budget set forth in Exhibit C hereto [omitted]. Developer shall notify Customer of any circumstances, when and as they arise, that may reasonably be anticipated to lead to a material deviation from the development timetable and development milestones set forth in Exhibit B. Developer shall devote sufficient time and effort and shall allocate sufficient personnel resources to the Subject Programs as may be required for the development and testing thereof. Developer shall conduct and conclude such development and tests in a professional manner, incorporate into the final version such modifications as the tests indicate are necessary, and conduct such further tests as may be required in the circumstances.

1.03. Restrictions on Developer Activities. During the term of this Agreement, Developer shall not, without the prior written consent of Customer, contract to provide similar services to any third party (excluding Customer or any affiliate or subsidiary of the parties hereto). Developer shall not apply or divert any funds or other resources budgeted to the development of the Subject Programs to any services or products to be provided to any third party. Developer shall not contract with any third party that is engaged in the development, licensing, sale, or use of computer software functionally similar to the Subject Programs and that is, or may be, in direct competition with Customer.

1.04. Use of Third-Party Consultants. Developer may retain third parties to furnish services to Developer in connection with Developer's work on the Subject Programs if necessary as only an incident to such development activities; provided, however, that all third parties who perform work in furtherance of the development of the Subject Programs shall execute appropriate documents acknowledging their work-for-hire status, effecting assignments of all rights with respect to such work, and undertaking obligations of confidentiality respecting such work.

1.05. Designation of Supervisor. Developer shall designate an employee who shall be assigned by Developer to supervise the development of the Subject Programs. Such employee shall devote substantially all of his business time to such endeavor.

Article II


2.01. Delivery and Installation. Immediately upon the completion of each development milestone set forth at Exhibit B, Developer shall deliver and install the Subject Programs at the [data-processing operations center of Customer] and shall deliver thereto all documentation and other materials required to be provided in accordance with such milestone. Developer shall inform Customer of the availability of each portion of the Subject Programs for testing by Customer (the date of such notification hereinafter Acceptance Test Date).

2.02. Acceptance Tests. Promptly after the Acceptance Test Date, Customer shall perform the tests specified in Exhibit D hereto [omitted] (hereinafter Acceptance Tests), during the period specified therein, to determine whether each module of the Subject Programs (a) conforms to the Specifications and Performance Standards for such module and (b) performs repetitively on an appropriate variety of data without failure. Upon completion of the final development milestone, the Acceptance Tests shall be performed on the Subject Programs in their entirety in order to determine whether the Subject Programs (a) meet all Specifications and Performance Standards and (b) operate with internal consistency. In the event that the Acceptance Tests establish that the Subject Programs do not conform to and perform in accordance with the Specifications and Performance Standards, Customer shall forthwith notify Developer, and Developer shall modify the Subject Programs to ensure that they will so perform. Customer shall thereafter undertake further Acceptance Tests of equal duration. Failure of the Subject Programs to comply with the Specifications and Performance Standards after such second round of Acceptance Tests shall constitute a material breach of this Agreement by Developer under Section 10.02 hereof.

2.03. Completion of Development Phases. If and when the Acceptance Tests establish that the Subject Programs delivered upon completion of any phase of development comply with the applicable provisions of the Specifications and Performance Standards, Customer shall promptly notify Developer that Customer accepts the Subject Programs, and the date of such notification shall be the date on which Customer shall be obligated to make the applicable milestone payment specified in Exhibit C hereto.

Article III


3.01. Installment Payments for Development. Customer shall pay Developer the sum of ---------- dollars ($----------) in installments in accordance with the payment schedule set forth in Exhibit C, and each installment shall be payable upon completion of each milestone by Developer and acceptance by Customer in accordance with Article II.

3.02. Support Services Payment. Customer shall pay fees to Developer for error-correction and support services (Support Services Fees) in the annual sum of ---------- dollars ($----------) in quarterly installments beginning on the first day of the first month following expiration of the warranty period set forth in Article VI hereof. Developer shall be entitled to increase the Support Services Fees at any time after the [number]-year period beginning upon acceptance by Customer of all Subject Programs upon prior written notice to Customer of not less than [number] days.

3.03. Taxes. The fees set forth above are exclusive of taxes. Customer shall be responsible for all taxes, levies, and assessments, excepting taxes based on the net income of Developer, and shall, upon receipt of notice from Developer, promptly pay, or if Developer has paid any such amounts, reimburse Developer for all such taxes, levies, or assessments.

Article IV


4.01. Perpetual License. Developer hereby grants to Customer, subject to the terms and conditions of this Agreement, a perpetual, nontransferable license (without the right to grant sublicenses) to the Subject Programs in object code form. The license granted hereunder shall be exclusive [optional clause: in [name of territories]] for a period of one year following acceptance by Customer of all of the Subject Programs as set forth in Article 11 hereof. The license shall automatically revert to a nonexclusive license following the one-year period of exclusivity granted herein.

4.02. Scope of License. The license granted pursuant to Section 4.1 shall authorize Customer to:

a. Install the computer software portion of Subject Programs on computer systems owned, leased, or otherwise controlled by Customer;

b. Utilize the Subject Programs for its internal data-processing purposes (but not for time-sharing or service bureau purposes); and

c. Copy the Subject Programs only as necessary to exercise the rights granted herein.

Article V


5.01. Limited Right of Use. This Agreement does not provide Customer with title or ownership of the Subject Programs, but only a limited right to use and copy the Subject Programs as provided herein. Customer shall keep the Subject Programs free and clear of all claims, liens, and encumbrances.

5.02. Reservation of Rights; Acknowledgments. Customer acknowledges that the Subject Programs and all program documentation relating thereto to be developed under the Agreement and provided by Developer hereunder are commercially valuable, proprietary products of Developer, the design and development of which reflect the effort of skilled development experts and the investment of considerable time and money. Customer acknowledges that the Subject Programs and all program documentation relating thereto contain and shall contain substantial trade secrets of Developer, which Developer shall entrust to Customer in confidence to use and copy only as expressly authorized by this Agreement. Customer further acknowledges that Developer claims and reserves all rights and benefits afforded under federal copyright law in all Subject Programs and program documentation as unpublished works. Any copying, modification, or distribution of such copyrighted works not expressly authorized by this Agreement is strictly forbidden.

5.03. Confidentiality Obligations. In addition to those limitations on Customer's rights set forth in Article IV, Customer shall not, at any time, disclose or disseminate the trade secrets embodied in the Subject Programs or any supporting program documentation to any other person, firm, organization, or employee who does not need to obtain access thereto consistent with Customer's rights under this Agreement. Under no circumstances may Customer modify, reverse compile, or reverse assemble the object code contained within the Subject Programs. Under no circumstances may Customer disclose or disseminate such trade secrets to any competitor of Developer. Customer shall devote Customer's best efforts to ensure that all persons afforded access to the Subject Programs and all supporting program documentation protect Developer's trade secrets against unauthorized use, dissemination, or disclosure.

5.04. Proprietary Legends. Customer shall reproduce and include in all copies of the Subject Programs prepared by Customer the copyright notice(s) and proprietary legend(s) of Developer as they appear in the Subject Programs and on the media containing the Subject Programs supplied by Developer.

5.05. Survival of Obligations. Customer's obligations under this Article V shall survive termination of this Agreement for any reason and shall remain in effect for as long as Customer continues to possess, use, or control the Subject Programs, any supporting program documentation, or any trade secrets derived therefrom.

Article VI


6.01. Limited Warranty. Developer warrants, for the benefit only of Customer, that the Subject Programs shall conform in all material respects to the Specifications and Performance Standards (except for subsequent modifications made at Customer's request). Such warranty shall apply only for a period of one year after acceptance of the Subject Programs. Developer assumes no responsibility for obsolescence of the Subject Programs.

6.02. Exclusive Remedy. As the exclusive remedy of Customer for any nonconformity or defect in the Subject Programs for which Developer is responsible, Developer shall utilize Developer's best efforts to correct or cure such nonconformity or defect. However, Developer shall not be obligated to correct, cure, or otherwise remedy any nonconformity or defect in the Subject Programs if (a) Customer has performed any maintenance to the Subject Programs without Developer's authorization; (b) the Subject Programs have been misused or damaged in any respect other than by personnel of Developer; or (c) Developer has not been notified of the existence and nature of such nonconformity or defect promptly upon its discovery.


6.04. Limitation of Liability. The cumulative liability of Developer to Customer for all claims whatsoever related to the Subject Programs or this Agreement, including any cause of action sounding in contract, tort, or strict liability, shall not exceed the total amount of all fees paid to Developer by Customer under this Agreement. This limitation of liability is intended to apply to all claims of Customer, without regard to which other provisions of this Agreement have been breached or have proven ineffective.

6.05. Consequential and Special Damages. In no event shall Developer be liable for any loss of profits; any incidental, special, exemplary, or consequential damages; or any claims or demands brought against Customer, even if Developer has been advised of the possibility of such claims or demands. This limitation on damages and claims is intended to apply to all claims of Customer, without regard to which other provisions of this Agreement have been breached or have proven ineffective.

Article VII


7.01. Support Services Undertakings. Beginning on the first day of the first month following expiration of the warranty period set forth in Section 6.01 hereof, Developer shall provide the error-correction and support services as set forth in this Article VII.

7.02. Delineation of Support Services. The error- correction and support services provided shall include the following:

a. Telephone hot line support during Developer's normal days and hours of business operation. Such support shall include consultation on the operation and utilization of the Subject Programs. Customer shall be responsible for all telephone equipment and communication charges related to such support; and

b. Error-correction services, which shall consist of Developer using Developer's best efforts to design, code, and implement programming changes to the Subject Programs and modifications to the documentation to correct reproducible errors therein such that the Subject Programs are brought into conformance with the Specifications and Performance Standards.

7.03. Customer Role in Support Services. The provision of error-correction services set forth in Section 7.02(b) shall be expressly contingent upon (a) Customer promptly reporting any errors in the Subject Programs or related documentation to Developer in writing, utilizing the Error Report Form furnished by Developer to Customer; (b) Customer not modifying the Subject Programs absent the express written consent of Developer; and (c) Customer utilizing the Subject Programs only as authorized hereunder.

7.04. Place of Service Performance. All services provided under this Article VII shall be provided from Developer's facility unless Developer, in Developer's sole discretion, determines that it is necessary to provide such services at Customer's facility.

7.05. Period of Support Undertaking. Subject to the timely payment by Customer of the Support Services Fees and the absence of a material breach by Customer of any other terms of this Agreement, Developer shall offer to Customer the services set forth in Section 7.02 hereof for a minimum of [number] years after completion of development work hereunder.

7.06. Customer Termination of Support Services. Customer shall have the right to discontinue the services set forth in Section 7.02 hereof upon not less than [number] days' prior written notice to Developer.

Article VIII


8.01. Indemnification. Developer agrees to provide Customer with the following protection against claims of proprietary right infringement of the Subject Programs:

a. Nature of Indemnification. Developer shall (i) indemnify Customer from and against any liability, cost, loss, or expense of any kind; (ii) hold harmless Customer and save Customer from any liability, cost, loss, or expense of any kind; and (iii) defend any suit or proceeding against Customer arising out of or based on any claim, demand, or action alleging that the Subject Programs or any portion thereof as furnished under this Agreement and used within the scope of the license hereunder infringes any third-party rights in copyright or issued patent or the trade secret rights of any third party in the United States. Additionally, Developer shall pay any costs, damages, or awards of settlement, including court costs, arising out of any such claim, demand, or action, provided that Customer promptly gives written notice of the claim, demand, or action to Developer and that Developer may direct and fully participate in the defense to any settlement of such claim, demand, or action.

b. Undertakings if Infringement Found. In the event that the Subject Programs or any portion thereof, as furnished under this Agreement and used within the scope of the license hereunder, are held in such a suit or proceeding to infringe a third-party proprietary right as set forth in Section 8.01 (a), and that the use of the Subject Programs or portion thereof is enjoined, Developer shall, at Developer's sole option and expense (i) procure for Customer the right to continue using the Subject Programs or portion thereof; (ii) replace the same with noninfringing software of equivalent functions and efficiency; or (iii) remove the Subject Programs or portions thereof. In the event that Developer removes the Subject Programs pursuant to (iii) above, Customer shall receive a refund of that portion of the fees paid pursuant to Section 3.01 as Developer determines is reasonable.

Article IX


9.01. Term. This Agreement shall commence on the date first written above and shall continue in effect for [number] years. All licenses hereunder shall be perpetual, unless earlier terminated according to this Article IX.

9.02. Termination for Cause. Either party may terminate this Agreement at any time in the event of a material breach of the terms hereof by the other party if such party shall fail to cure such material breach within [number] days of receipt of written notice thereof.

9.03. Actions Upon Termination. Upon termination of the Agreement for any reason by either party, Customer shall immediately cease use of the Subject Programs and shall, within [number] days of such termination, deliver to Developer copies of the Subject Programs and related materials and documentation, or portions thereof furnished by Developer hereunder. Customer shall also warrant in writing that all use of Subject Programs or any portion thereof has been permanently discontinued. Upon termination of the Agreement, Developer's obligation to provide warranty or other services hereunder or under this Agreement shall cease.

Article X


10.01. Force Majeure. Either party shall be excused from delays in performing or from its failure to perform hereunder to the extent that such delays or failures result from causes beyond the reasonable control of such party; provided that, in order to be excused from delay or failure to perform, such party must act diligently to remedy the cause of such delay or failure.

10.02. No Agency. Developer, in furnishing services to Customer, is providing services as an independent contractor. Developer does not undertake by this Agreement or otherwise to perform any obligation of Customer, whether by regulation or contract. In no way is Developer to be construed as the agent or acting as the agent of Customer in any respect, all other provisions of this Agreement notwithstanding.

10.03. Multiple Counterparts. This Agreement may be executed in several counterparts, all of which taken together shall constitute one single Agreement between the parties.

10.04. Section Headings; Exhibits. The article, section, and subsection headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. The exhibits referred to herein and attached, and to be attached hereto, are incorporated herein to the same extent as if set forth in full herein.

10.05. Required Approvals. Where agreement, approval, acceptance, or consent by either party is required by any provision of this Agreement, such action shall not be unreasonably delayed or withheld.

10.06. No Waiver. No delay or omission by either party hereto to exercise any right or power occurring upon any noncompliance or default by the other party with respect to any of the terms of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by either of the parties hereto of any of the covenants, conditions, or agreements to be performed by the other shall not be construed to be a waiver of any succeeding breach thereof or of any covenant, condition, or agreement herein contained. Unless stated otherwise, all remedies provided for in this Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to either party at law, in equity, or otherwise.

10.07. Authority of Developer. Developer has the sole right and obligation to supervise, manage, contract, direct, procure, perform, or cause to be performed all work to be performed by Developer hereunder unless otherwise provided herein.

10.08. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of [state].

10.09. Entire Agreement. This Agreement and the exhibits annexed hereto constitute the entire Agreement between the parties, and there are no understandings or agreements relative hereto other than those that are expressed herein, and no change, waiver, or discharge hereof shall be valid unless it is in writing and is executed by the party against whom such change, waiver, or discharge is sought to be enforced.

10.10. Notices. Under this Agreement, if one party is required to give notice to the other, such notice shall be deemed given if mailed by U.S. mail, first class, postage prepaid, and addressed as follows (or as subsequently noticed to the other party): [names and addresses of parties].

10.11. No Assignment. Except for an assignment by Customer to a parent, subsidiary, or affiliate entity, neither party shall without the prior written consent of the other party assign or transfer this Agreement except by merger, reorganization, consolidation, or sale of all or substantially all of the party's assets, and any attempt to do so shall be void and of no force and effect.

IN WITNESS WHEREOF, Developer and Customer have caused this Agreement to be signed and delivered by their duly authorized officers, all as of the date first hereinabove written.


By: [signature]




By: [signature]



*** If Required By State Law ***

This Section for Notary:


State of _________

County of ________ [County]

On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand and official seal.

Signature ________

My commission expires: _____