The Dos and Don'ts of a Software Development Contract

Every great software development outsourcing relationship starts with one critical component: a contract. This document acts as a means of setting out the terms of your work, the expectations and requirements of you and your partner, and other details about the development process and business agreement.

Sure, it may seem like a hassle to create a software development contract, but it's important to have one as it will avoid hiccups, confusion, and disputes in the future. How do you write one that makes both partners comfortable and confident? We've outlined some essential dos and don'ts below.

#1 Define the requirements

Requirements are the backbone of your contract and the entire project. Simply put, requirements are the key features that products absolutely must have. The business leader or person signing the contract must specify the essential requirements in the contract after ensuring that the development team is committed to meeting them and deems them viable for implementation.

It's a good idea to outline as many important requirements as possible in your contract to avoid confusion and disagreements about expectations later. Additionally, ensure that procedures regarding potential changes to requirements are presented in writing. By signing the contract, both parties agree to these terms.

#2: Describe Communication Methods

Whether you are working with an outsourcing partner in the same city or in a different country, clear and effective communication plays a crucial role in the success of your venture. Unfortunately, it can also be a problem when you don't plan how and when you will communicate, especially when you are dealing with language barriers and time zone differences.

To prevent communication issues from interfering with your project, you should outline the procedures and practices you will use to connect with your partner. Describe the tools that will be implemented, the frequency of contact, and other expectations. List people on each team to answer questions and also serve as general project contacts.

#3 Be specific

Specificity – from requirements to plans to communication with other concerns – will serve your partnership well. If you leave something up to doubt or interpretation, you are bound to get into conflict later if problems arise, as they often do. Be as thorough as possible when defining the terms of your project, as you don't want to have any misunderstandings or confusion later.

#4 Address timelines and milestones

While it's important to address deadlines in your contract, remember that they are often disrupted as requirements change and issues arise. To help avoid problems, you should also establish benchmarks and milestones when certain parts of the project are completed. This should allow both parties to better monitor the project.

#5 Prioritize requirements and features

We discussed the importance of establishing clear requirements. But in addition to establishing requirements, you must also prioritize them. After all, not all resources have equal weight. While you want to include as many critical requirements as possible—and be specific about them—you don't want to include so many that the project is never completed.

#6 Cover intellectual property

Intellectual property (IP) is something you will need to cover in your contract. This concerns who actually owns the rights to the product you create. Typically, without a contract stating otherwise, these rights would go to the team that built the product, i.e. the software developers.

Before immediately specifying that the company owns the intellectual property rights, consider several angles, such as if you need the team to make changes, which can cause confusion. It's a good idea to consult a lawyer about the best course of action and use their advice to inform your contract.

7 Don't ignore the possibility of complications

It is very rare that complications do not arise throughout the project. That's why it's important to factor multiple scenarios into your contract to prevent these complications from becoming a bigger issue that negatively affects the entire product.

This will help protect both the company and the developer if and when something goes wrong. Be sure to include lots of “if” and “then” clauses – in other words, “If such and such happens, then this is what we will do.”

#8: Don’t Let Scope Creep Derail Your Project

Defining the project scope is a crucial step. This prevents scope creep, which occurs when requirements and other aspects of the project change and grow beyond what is feasible to accomplish within the given timeline. If parameters are not clearly structured at the beginning of the project, scope creep can threaten to destroy your hard work.
To prevent this common scenario from occurring in your project, include a scope statement in the contract, clarifying that the project cannot expand beyond reasonable limits. Make sure you clearly define the parameters and outcomes as well.

#9 Don't leave it open-ended

In the same vein, it is absolutely imperative that you do not leave any aspect of the project or contract open. Don't assume anything from your partner that you haven't clearly stated and described in the contract.

For example, if you as a business leader want ongoing maintenance and support from your software development team in the future, you will need to make sure that your contract says so and that they agree to those terms. Otherwise, this is not something you can expect from your partner.

Don't assume any terms or consider them implied, whether by verbal agreement or your own belief that something is automatically included – this may come back to haunt you later.

The software development process is complex. A big part of making sure everything runs smoothly is getting everyone on the same page. A specific, clearly defined and detailed contract is essential for this to happen.