As a lawyer will almost always answer – it depends. Generic, template agreements downloaded from the Internet will often be of limited value (or worse, simply not be fit for purpose). Where the contract is delivering something important, ensure it is tailored to properly align to your goals and requirements.
Commonly used technology contracts
Here’s a handy list of some of the contracts you may need in your tech company’s early years:
- App / Software / Website development agreement – if you are instructing a third party to develop, configure or bespoke something, you should use a development agreement to ensure that you receive what you expect in a timely fashion: many disputes centre around a developer not delivering in line with a customer’s expectations or delivering late. A development agreement will also deal with intellectual property rights to ensure you have ownership – or at least the use rights that you need.
- Customer-facing T&Cs – not only does having standard terms and conditions that neatly set out your product and commercial terms save time (and legal costs!) in the long run, it can put you on the front foot in a negotiation. We see far more successes where a supplier presents their T&Cs as a starting point – even where one or two points are ultimately amended – than when the customer is able to dictate their terms of purchase.
- Confidentiality agreement – also referred to as a non-disclosure agreement (NDA). Experience tells us that tech startups are exploring and sharing ideas with third parties constantly. In order to protect your concepts, ensure third parties sign an NDA to prevent them using your idea or sharing it with someone else.
- And the rest… – of course there are many others: IP assignments, articles of incorporation, employment contracts, hosting agreements, software licences or SaaS contracts, website terms of use and so on. It is important to understand that contracts come in many shapes and forms.
Do you actually need a contract?
Of course, sometimes an informal agreement sealed with a handshake will be enough. Indeed, it is possible to commit to a binding agreement without writing it down (click here for the latest position on verbal contracts). However, keep in mind the benefits of a formal, written agreement and when it can be appropriate to have one:
- Clear alignment of understanding – ensuring a contract is in place gives the people and businesses involved clarity about what a given project requires. Not only can this help ensure certainty in terms of each party’s obligations, but it helps to shape the roadmap to completion and should keep everyone accountable throughout.
- Encourages analysis of the deal – committing a project to writing makes for less chance of disagreements and/or disputes in respect of the project’s goals (think payment obligations, timescales, and the “what ifs?” of the arrangement) and generally contributes to a smoother process. Putting in the work before allocating budget to a project is often worth it in the long run.
- Provides rights and remedies if something goes wrong – the Tech industry is largely driven by innovation. Protecting these innovations in a highly competitive marketplace is vital to a company’s success. Often, the best way of doing this (especially for start-up companies) is ensuring a Tech contract keeps a company’s knowhow and way of doing things safe, while clearly articulating what happens if things go wrong.
Such protections can include areas such as:
- Termination – can you get out of the agreement if it is not going well?
- Intellectual Property – are you taking / granting the rights you intend?
- Data Protection – will you (or the other party) be processing any personal data?
When to get advice
The right lawyer can provide comfort that you are ‘on the right track’ and not taking any unnecessary or disproportionate risks when it comes to contracts. Developing templates or fully negotiating a business-critical agreement can be far more cost efficient in the long term and a trusted legal advisor will guide you as to when that is necessary (and be honest about when it is not).
If you are thinking about whether a legal contract is necessary for your business – or are about to utilise a third party for a business-critical project – and have any questions, contact Luke Jackson at Walker Morris LLP.