IT - Projects and Agreements • LAWFOX

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Many aspects are involved in software development and other IT projects. Customers, consultants, analysts, project managers, helpdesk employees and programmers can have completely different expectations about what should actually be developed and under what conditions. So a lot can go wrong during or after the project.

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Agreement

However, there is no specific law or rules for software development. A good agreement with clear arrangements is therefore extremely important. The party accepting the responsibility must in any case act as a “good contractor”. But it is not always clear whether this has been met.

Problems

And that can, therefore, cause a lot of problems. How do parties deal, for example, with bugs, errors and problems? Has the software been delivered and accepted in accordance with the agreement? And has a maintenance agreement (Service Level Agreement, SLA) been agreed upon? Who actually owns the software? And do you have to pay for all the extra work / can you charge extra work?

The most common problems in IT projects are related to (i) too many errors; (ii) too long lead times and (iii) too many costs being charged. Just pulling the plug from a project is often not the solution.

Possible Solutions

Fortunately, the law provides enough solutions to such dilemmas: termination, dissolution, compensation, destruction, repayment, suspension and so on. It is important to know which means you can (or should) use when. What do you have to do to pull the plug? Do you have to pay for something you are not satisfied with? And how do you deal with that nagging customer who always wants new functionalities for the same (fixed) price?

Are you a Supplier?

As a supplier, you want to deliver a project to your satisfaction and be paid for it. Often other or extra (unforeseen) wishes from customers ensure that a project takes longer than planned, requires more resources than expected, or simply goes less smoothly than expected. Firstly, we advise the supplier to keep a close eye on project management. Moreover, one should make good agreements concerning the specific payment of work, especially with regard to the limitation of your own responsibility. If a customer does not pay or does not pay on time but you have a good agreement, legally speaking you then have much backup for your position.

Is a customer not paying on time? Then you are in principle entitled to suspension. A suspension means that you are no longer obliged to carry out your work that is related to the payment obligation until the other party has paid again. There is no specific formal form required that you need to use to suspend, so it does not matter how exactly you do it. Nevertheless, you must ensure that you state clearly what you still want/expect, what you no longer do yourself, and that, however, you are willing to do that again if your expectations are met. This not only applies to the absence of payments, but also to other forms of necessary cooperation by the customer. You may also be able to give the customer notice of default so that you can subsequently recover any damage from the customer.

Is the customer not satisfied with the delivered or performed work? Then it is good to first assess whether you have fulfilled your responsibilities. Even if you have already received a notice of default from the customer, it is good to immediately provide certainty: Check whether the notice of default meets the legal requirements and whether the notice of default is justified.

5 Tips for Suppliers

1. Make good arrangements. An IT project can stand or fall with many variables. Pay particular attention to what, under whose responsibility, when and at what price which work should be done. And what about liability, delivery, guarantees, ownership and exit?

2. Make sure customers pay on time and in full. A little bit of courtesy is often not wrong, but do not let it go too far: Before you know it, you have done work for large costs that you no longer will get paid for.

3. Be courteous in service, but don’t go overboard. It is often simple and quick to add an additional functionality, that has not been agreed upon initially. Nevertheless, you should draw the line in time and do not let it go too far.

4. If you depend on the cooperation of the customer, for example, because of the desired input or resources, then you stick to that. Do not proceed on your own. And escalate if necessary. Ironically, good agreements about escalation procedures often have a de-escalating effect (“Escalation Clause”).

5. Contact legal assistance in time to receive help from a lawyer who is an expert in the field of IT / ICT / software. Expertise saves many damage costs.

Are you a Customer?

As a customer of software, you want the requested software to meet your expectations. You don’t want to pay too much and you want it on time. So make sure you have good agreements about what you want, at what price and when. After all, the software must fit in well with your business processes. Please note that you are not required to pay until your expectations are met. The supplier will want to agree on certainty for this, so for example with an acceptance procedure, however, this can only benefit you if the specifications that are tested are also part of your expectations.

Does the supplier not deliver on time? Then you are in principle entitled to suspension. A suspension means that you can postpone your payment obligation until the corresponding obligation is still met. You can suspend without a specified formal form, so it does not matter how you do it. However, it is necessary that you state clearly what you still expect, what you are no longer going to do yourself, and that you are willing to do that again if your expectations are met.

Does the software you purchased contain errors or flaws? Then check again what has been granted in the agreement. You may be able to give the supplier notice of default so that you can subsequently recover any damage from him or her. If desired, you can often (partially) dissolve the agreement afterwards. However, these steps are so important that proper preparation is crucial. Consult this with a competent lawyer, who has knowledge of IT and software projects.

5 Tips for Customers

1. Make good arrangements. An IT project can stand or fall with many variables. Pay special attention to who is responsible for what, when the software is supposed to be delivered and whether this is a (fatal) deadline or just a schedule, and lastly, what price you have to pay. Also pay attention to any (limitation or exclusion of) liability, (lack of) guarantees and maintenance obligations, ownership and exit.

2. Make sure you do not have to pay until the software has been delivered on time and in full. A bit of courtesy is often not wrong, but do not go too far: before you know it you have paid a large amount for an unwanted product.

3. Be lenient in lead times, but don’t overshoot boundaries. An extra week often does not hurt, but keep close attention and draw the line in time. Continuing to postpone can mean that another postponement is suddenly justified. So be firm.

4. If it is necessary, escalate. Ironically, good agreements about escalation procedures often have a de-escalating effect (“Escalation Clause”).

5. Contact legal assistance in time to receive help from a lawyer who is an expert in the field of IT / ICT / software. Expertise saves many damage costs.

Contact

LAWFOX’s lawyers are happy to assist you. We can prevent legal proceedings for your company or organization, or take legal action if required. We have a team available for you that is glad to help with all your questions about IT projects and agreements.

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