Software/IT Service Agreement
What is a Software/IT Service Agreement?
A Software/IT Service Agreement is a legally binding contract between a client (individual or business) and a software developer, IT consultant, service provider, or freelancer. It outlines the scope of work, project timelines, payment terms, intellectual property rights, confidentiality obligations, and responsibilities related to services such as software development, app or web development, cloud integration, IT support, system upgrades, or cybersecurity.
This agreement ensures that all expectations are clearly defined, progress is trackable, payment milestones are documented, intellectual property rights are protected, and obligations are legally enforceable.
Example: You run a fintech startup and already have backend APIs in place. You decide to outsource the front-end development to an IT services firm to build a custom web dashboard using React, integrate it with your APIs and database, and handle some UI/UX tasks.
Rather than relying on verbal conversations or multiple email threads, you sign a Software/IT Service Agreement with the IT Service company. The agreement clearly outlines project phases, coding standards, intellectual property rights (you retain ownership of the final product), payment milestones tied to deliverables, Functional and
Result?
- Clarity on Scope and Milestones through a structured project timeline and defined technical deliverables IP Ownership Secured so your business owns the final product, not just temporary access Reliable Payment Terms aligned with stages like design, development, and deployment Ongoing Support Assured through defined bug-fix windows and update policies Legal Protection Built-In in case of delays, non-performance, or data breaches
Why a Software/IT Service Agreement is Important
A Software/IT Service Agreement is crucial for establishing clear, enforceable expectations between a business and its software developer, IT consultant, or technology service provider. It defines the scope of services, such as app development, IT support, cloud integration, cybersecurity, or custom software builds along with timelines, payment terms, data security, and IP ownership.
Without a formal agreement, your business is exposed to cost overruns, delays, bugs, and disputes over code ownership or warranties. This contract not only helps align technical goals and commercial expectations, but also ensures legal protection, especially when dealing with high-stakes software projects or sensitive data systems.
Who Needs a Software/IT Service Agreement?
A Software/IT Service Agreement is essential for:
1. Startups outsourcing app development or platform builds - When you're building your MVP or launching a SaaS product, you need clarity on deliverables, timelines, and ownership of the codebase. A formal agreement ensures you retain IP rights, set clear milestones, and avoid cost overruns or vague tech outputs.
2. Businesses hiring software developers, IT consultants, or tech vendors - Whether you're getting a custom CRM developed or hiring an IT firm for cloud migration, a written contract protects your business from delays, scope creep, and non-performance while legally securing your data and systems.
3. Entrepreneurs and solopreneurs delegating technical tasks - If you're hiring a freelance developer to create a website, API, or automation tool, an agreement ensures the work is done professionally, on time, and that you own the final output without future dependency on the developer.
4. Agencies working with external IT teams for client projects - Marketing or creative agencies often subcontract developers or tech support for backend integrations, apps, or landing pages. A proper agreement helps ensure confidentiality, quality, and alignment with client goals, reducing risks of rework or missed deadlines.
5. Companies needing long-term support, maintenance, or upgrades - For businesses investing in ongoing tech support, security patches, or infrastructure management, this agreement locks in SLA terms, response times, and fees protecting against service disruption or price escalation.
6. Anyone sharing sensitive business data or proprietary code - If your project involves customer data, internal workflows, or proprietary algorithms, an agreement is critical to define confidentiality, data security, and ownership clauses especially under laws like the IT Rules, 2021 or sector-specific compliance.
Example - Suppose you're a logistics company hiring an IT vendor to build a custom shipment tracking dashboard and integrate it with your existing ERP. A Software/IT Service Agreement clarifies delivery timelines, feature specs, access rights, payment terms, and support obligations. Without it, you risk miscommunication, lack of accountability, or disputes over who owns the final code potentially stalling your operations or exposing your business to legal risks.
Why you need a Software/IT Service Agreement
A Software/IT Service Agreement is essential for protecting your business during technology development or support engagements. It defines technical deliverables, ensures accountability, and legally secures your intellectual property, code, and sensitive data. Whether you're building an app, outsourcing IT management, or automating your business systems, this agreement minimizes risk and keeps your project on track.
Key Benefits of a Software/IT Service Agreement
1. Defines Scope and Deliverables Clearly - Outlines the exact services to be provided whether it's software development, cloud setup, IT consulting, security audits, or ongoing maintenance. This prevents scope creep, clarifies responsibilities, and sets mutual expectations right from the start.
2. Establishes Legal Protection - Provides a legal framework in case of non-performance, missed deadlines, data loss, or code quality issues. If the service provider breaches the agreement or fails to meet deliverables, you have written proof to enforce your rights or claim damages.
3. Clarifies Payment Terms and Milestones - Specifies the total project cost, billing structure (hourly, fixed, or milestone-based), payment timelines, tax handling, and penalties for delays. This avoids ambiguity around pricing, refunds, scope changes, or late payments.
4. Sets Technical Standards and Quality Benchmarks - Defines how the solution will be tested, deployed, and reviewed. It may include uptime commitments, bug-fixing timelines, compatibility requirements, or compliance with data protection laws like GDPR or India’s IT Act.
5. Protects Confidential and Proprietary Information - Includes confidentiality and non-disclosure clauses to prevent misuse of your sensitive business information, source code, algorithms, client databases, or internal documentation. Essential when giving third-party access to core systems.
6. Secures Intellectual Property Rights - Clearly defines who owns the code, software, or systems being developed. Ensures that once payment is made, your business legally owns the output, including all source files, licenses, and documentation.
7. Reduces Risk and Allocates Liability - Outlines what happens in case of delays, defects, cybersecurity breaches, or third-party claims ensuring that liabilities are clearly distributed and neither party faces unexpected legal consequences alone.
8. Provides a Dispute Resolution Path - If disagreements arise over deliverables, delays, or payments, the agreement defines a process for mediation or arbitration helping resolve conflicts efficiently and avoiding lengthy legal battles that stall progress.
9. A Software/IT Service Agreement is your legal safety net for all tech-driven projects. It protects your investment, ensures accountability, and builds a structured, professional relationship with your tech partner—whether for a one-off app or long-term IT collaboration.
When Should You Use a Software/IT Service Agreement?
You should use a Software/IT Service Agreement when:
- You’re hiring a software developer, IT consultant, or tech vendor to build a website, mobile app, software platform, or provide IT support, cloud integration, cybersecurity services, or automation tools.
- The project involves intellectual property, code development, or access to sensitive business systems or data, and you want to protect your proprietary algorithms, databases, internal processes, or customer information.
- You want to define the project scope, technical specifications, milestones, testing protocols, delivery timelines, and payment structure before any coding, deployment, or consulting begins.
- You’re entering a short-term development project or a long-term IT engagement, and need clarity on responsibilities, update cycles, maintenance schedules, and support obligations.
- You’re making a financial commitment such as paying for development hours, licensing fees, cloud infrastructure, or performance-based incentives, and want legal protection to ensure value, delivery, and service quality.
- You want clear remedies in place for project delays, software bugs, security vulnerabilities, or non-performance, with defined escalation procedures and breach consequences.
- You’re outsourcing development to multiple vendors (e.g., backend developer, UI designer, QA tester, DevOps team) and need a structured agreement to avoid overlaps, secure data handling, and maintain control over the final product.
- You’re investing in technology to scale operations, automate processes, or launch a new digital product, and want legal clarity around ownership, licensing, data control, and dispute resolution in case the project goes off track.
Types of Software/IT Service Agreement
1. Software Development Agreement -
Covers the design, coding, testing, and deployment of custom software tailored to client requirements. This agreement defines the development timeline, technical specifications, intellectual property ownership, and any post-deployment support terms.
Example: A logistics startup hires a tech firm to build a custom delivery tracking platform with integrated billing. The agreement includes milestones, delivery dates, and full IP ownership transfer to the client.
2. Software Maintenance & Support Agreement -
Outlines the scope of ongoing services provided to keep an existing software system functional and secure. Includes bug fixes, system updates, performance tuning, and user support.
Example: An insurance company contracts a vendor to provide annual maintenance and 24/7 support for its policy management system, with SLAs defining response times and issue resolution deadlines.
3. Software as a Service (SaaS) Agreement -
Defines the legal terms for accessing and using a cloud-based software platform, typically on a subscription model. It includes user access rights, uptime guarantees, data privacy, compliance obligations, and termination conditions.
Example: A retail chain subscribes to a cloud-based CRM on a per-user/month model. The SaaS agreement specifies data hosting terms, 99.9% uptime, and GDPR compliance responsibilities.
4. IT Consulting Agreement -
Governs engagements where a consultant provides strategic or technical guidance on IT systems, digital transformation, cybersecurity, or tech architecture. It focuses on advisory deliverables rather than product development.
Example: A manufacturing company hires an IT consultant to assess legacy systems and recommend a cloud migration strategy. The agreement outlines the assessment process, reporting structure, and confidentiality requirements.
5. Managed IT Services Agreement -
Covers long-term outsourced IT services such as server monitoring, cybersecurity management, network administration, and help desk support. It includes service levels, uptime commitments, and data backup protocols.
Example: A mid-sized business signs a managed services agreement with an IT firm to oversee all internal tech infrastructure, ensuring 24/7 monitoring and monthly system health reports.
6. Software Licensing Agreement -
Details how a customer or third party may use proprietary software developed by the provider. It defines whether the license is exclusive or non-exclusive, the number of users, geographic limitations, and any restrictions on modifications.
Example: A healthcare software provider licenses its hospital management software to clinics across India on a non-exclusive, yearly subscription basis, with restrictions on reverse engineering or resale.
7. White-Label Software Development Agreement -
Used when a software developer creates a solution for another business to rebrand and resell under its own name. The agreement addresses confidentiality, IP ownership, rebranding rights, and support responsibilities.
Example: A marketing agency contracts a tech company to build a white-labeled analytics dashboard that it can resell to its clients as part of its digital solutions suite.
8. End-User License Agreement (EULA) -
Sets the terms under which a final user (individual or company) may install and use the software. Typically includes liability disclaimers, warranty limitations, permitted use, and prohibitions on copying or redistributing.
Example: A startup distributes its desktop productivity app with a EULA that limits use to personal devices, prohibits reverse engineering, and disclaims liability for data loss due to user error.
Software IT Service Agreement: Key Inclusions and Structure
1. Parties Involved
This section identifies all parties involved in the agreement:
- Client: The individual, business, or organization requiring the IT services, including their contact details and role in the project.
- Software IT Agency: The freelancer, agency, or company providing the IT services, including their contact details and role.
2. Scope of Work
Clearly defines the services to be provided:
- Describes specific services related to the project, such as website/app design, development, hosting, and maintenance.
- Specifies deliverables, such as designing a dashboard, home page, contact form, integration with Magento eCommerce, and Google Analytics.
- Includes any third-party tools, frameworks, or technologies to be used.
3. Project Timeline & Milestones
Sets the timeline for the project:
- Breaks the project into key phases, such as wireframe, UI/UX design, coding, testing, and deployment.
- Defines deadlines for each milestone and a final project completion date, ensuring both parties have clear expectations.
4. Payment Terms
Details the financial aspects of the project:
- Specifies the service charges and payment structure (e.g., fixed price, hourly, or milestone-based payments).
- Outlines invoicing procedures, payment due dates, and penalties for late payments.
5. Intellectual Property Rights
Clarifies ownership of intellectual property created during the project:
- Details ownership of the software, code, content, and design, including any usage rights.
- Specifies if the developer retains rights to any templates, plugins, or proprietary tools.
- Defines licensing terms and specifies who is responsible for costs if the client uses third-party tools or software in the project.
6. Confidentiality & Data Protection
This clause ensures the protection of sensitive information:
- Ensures client data, business information, and proprietary content are kept confidential.
- Requires compliance with relevant data protection laws (such as GDPR, CCPA, or applicable data protection laws in India) and outlines responsibilities for securing personal data.
- Specifies that any shared confidential information must be protected from unauthorized access or misuse.
7. Warranties & Liability
Defines the responsibilities and guarantees:
- Specifies the developer's warranty (30 or 60 days) on website functionality, security, and performance post-launch.
- Details the limitation of liability, ensuring the developer is not responsible for indirect or consequential damages.
- Describes the procedure for fixing bugs, issues, or defects that arise within the warranty period.
8. Dispute Resolution
Establishes the process for resolving conflicts:
- Specifies the method of dispute resolution, such as negotiation, mediation, or arbitration.
- Designates the jurisdiction (location or court system) governing the agreement to clarify legal rights and responsibilities.
- Defines time limits and procedures for filing complaints or claims.
9. Compliance & Legal Considerations
Ensures adherence to industry standards and legal requirements:
- Ensures compliance with accessibility, security, and development best practices, including industry-specific standards like SEO guidelines.
- Confirms adherence to applicable local, regional, or international laws, such as copyright laws and privacy regulations.
10. Amendments & Modifications
Defines how changes will be handled, often referred to as a change request:
- Specifies the process for requesting and approving changes or modifications to the original agreement.
- Describes the procedure for documenting amendments and obtaining mutual consent before proceeding with the changes.
- Includes any additional charges or revised timelines if modifications to the scope or project requirements occur.
11. Force Majeure Clause
Excuses both parties from liability in the event of unforeseeable circumstances:
- Addresses how unforeseen events like natural disasters, legal changes, or economic crises will impact the timeline and deliverables.
- Ensures neither party is held liable for non-performance due to force majeure events.
12. Subcontracting
Defines the conditions for outsourcing:
- Specifies whether the service provider may subcontract part of the project to third parties.
- Outlines how the client will be notified if subcontractors are used, ensuring transparency and quality control.
- The service provider remains responsible for any work completed by subcontractors.
13. Termination Clause
Details the conditions under which the agreement may be terminated:
- Specifies the termination procedures, including notice periods and any penalties for early termination.
- Defines conditions under which either party can terminate the contract due to a breach of terms.
14. Scope (In-Scope & Out-of-Scope, Assumptions, Deliverables, and Responsibility of Both Parties)
Clarifies expectations and limits:
- In-Scope: Lists all services, features, and tasks included in the project.
- Out-of-Scope: Details services or tasks not included, preventing misunderstandings.
- Assumptions: Defines assumptions, such as availability of necessary resources or third-party integrations.
- Deliverables: Lists the exact deliverables to be provided, such as a working website, user documentation, or support.
- Responsibilities: Details the responsibilities of both parties to ensure successful project completion.
15. Termination for Convenience
Allows either party to terminate the contract without cause:
- Specifies the notice period required for termination for convenience.
- May include terms for compensation in case of early termination, especially if the developer has already started work or invested resources.
Important Indian Laws Related to Software/IT Service Agreement
Indian Contract Act, 1872
In India, the validity of a Software/IT Service Agreement is governed by the Indian Contract Act, 1872 (Sections 10, 14, 23, 27, and 73). The agreement must be lawful, voluntary, and enforceable. Section 27 allows reasonable restrictions on trade to protect intellectual property, proprietary software, and confidential business information.
Consequences of Breach
GST Implications
Governing Laws
Copyright Act
IT Act
Trademark Act
Indian Contract Act, 1872
If either party breaches the agreement, the affected party can take legal action under the Indian Contract Act, 1872, leading to:
- Legal Action - The aggrieved party can approach the court to enforce the agreement and recover losses caused by the breach.
- Compensation - The defaulting vendor may be held liable to pay monetary damages for any financial or business loss suffered by the client.
- Termination of Agreement - The non-breaching party can choose to terminate the contract immediately without further obligations.
- Impact on Professional Reputation - A breach can harm the vendor’s credibility in the industry, affecting future projects, client trust, and long-term business prospects.
Goods and Services Tax (GST) Act, 2017
As per the Goods and Services Tax (GST) Act, 2017, services provided under Home Service contracts are subject to GST. The service provider must charge and remit GST at the applicable rate. Both parties should clarify whether pricing is inclusive or exclusive of GST to avoid tax disputes..
Arbitration and Conciliation Act, 1996
Under the Arbitration and Conciliation Act, 1996, disputes arising from the Software/ IT Service Agreement can be resolved through arbitration, ensuring a faster, confidential, and fair resolution.
An arbitration clause in your agreement ensures benefits like:
- Faster Resolutions: Avoids lengthy legal battles.
- Scope of Services: The description of services provided by the parties.
- Confidential Proceedings: Keeps sensitive business information private.
- Fair Dispute Resolution: A neutral arbitrator decides the case
Copyright Act, 1957
Protects the original content, design, and code developed for the website. (Under Section 17 and 19) – Specifies that the developer (creator) owns the copyright unless the agreement transfers ownership to the client and requires a written agreement to transfer copyright ownership.
Consequences of Copyright Breach
If the agreement doesn’t clearly transfer copyright, or its terms are breached:
- Legal Action – The rightful owner can sue for copyright infringement and to immediately stop the use of the product.
- Compensation – The violating party may pay damages or statutory penalties.
- Criminal Liability – In serious cases, fines or imprisonment may apply.
Information Technology Act, 2000
The Information Technology (IT) Act, 2000 governs electronic contracts, data security, and cyber laws related to software and IT services. Under Section 10A ,43A and Section 72 that penalizes unauthorized access, misuse, or disclosure of confidential business and user data.
Consequences of Breach:
- Compensation - In case of Civil complaint, the wrongdoer will be held liable to pay monetary damages for any financial or business loss suffered.
- Legal Action - In case of Criminal complaint, the other will have to pay penalties or imprisonment for the defamation caused and for the unauthorized access or data misuse.
Trademark Act, 1999
The Trademark Act, 1999 protects software branding elements, such as software/Product names, logos, slogans, and UI/UX elements and Domain Names for IT Businesses
Consequences of Breach under the Trademark Act, 1999
- Legal Action: Where the court orders to immediately stop using the trademark or to take certain actions to fix the harm caused.
- Damages or seizure of goods: Where any products, packaging, or materials carrying the copied trademark may be taken away or destroyed.
- Monetary Compensation: The wrongdoer will have to pay compensation to the trademark owner for the losses suffered or for the profits earned by using the mark illegally.
Checklist for Software/IT Service Agreement in India
Keep Multiple Copies
Action: Maintain at least two signed versions—one for the client and one for the IT service provider.
Tip: Back up signed versions on secure cloud platforms (e.g., AWS, DigiLawyer Cloud).
Expert Insight: Having both physical and digital copies helps in audit trails, renewals, or dispute resolution processes.
Pay Applicable Stamp Duty
Action: Pay stamp duty in accordance with your state’s rules for service agreements.
Tip: Generally ranges from ₹100 to ₹500 in most Indian states.
Expert Insight: Avoid under-stamping—use your state’s online portal or DigiLawyer’s digital stamp service for compliance.
Outline Roles and Responsibilities
Action: Clearly mention what each party is responsible for—coding, deployment, UAT, client-side access, etc.
Tip: Use annexures to detail responsibilities, timelines, escalation paths, and reporting structures.
Expert Insight: Clearly allocated roles reduce delays and miscommunication in software deployment.
Define Payment Terms and Milestones
Action: Specify if the fee is hourly, per module, subscription-based, or milestone-linked.
Tip: Clarify GST inclusion, TDS deductions, and payment timelines.
Expert Insight: Link payments to deliverables or approvals (e.g., alpha release, UAT sign-off) for better control.
Add IP Ownership and Licensing Clauses
Action: Define who will own the code, tools, or platforms developed or used.
Tip: Specify if IP is being assigned, licensed, or retained (especially in SaaS or white-label models).
Expert Insight: Clearly mention if the client will get source code access or only user-level licenses.
Insert Confidentiality and Data Protection Clauses
Action: Protect access to source code, system architecture, client data, or third-party APIs.
Tip: Include data handling protocols, encryption standards, and access control requirements.
Expert Insight: Ensure the agreement aligns with India’s DPDP Act and, if applicable, GDPR or other international laws.
Include Service Level Agreements (SLAs)
Action: Define response and resolution timelines for bugs, outages, and support tickets.
Tip: Use tables to set severity levels and time frames (e.g., Critical – 2 hrs, Moderate – 24 hours).
Expert Insight: SLAs build accountability and improve client satisfaction post-deployment.
Add Non-Compete and Non-Solicitation Clauses
Action: Prevent the provider from working with direct competitors or soliciting client’s employees or end-users.
Tip: Keep such restrictions limited in duration and scope to ensure enforceability.
Expert Insight: Avoid overly restrictive clauses—courts in India favor fairness and business continuity.
Define Termination, Renewal, and Exit Clauses
Action: Mention agreement duration, renewal procedures, and exit terms.
Tip: Add clauses for exit assistance (e.g., handover, documentation, code transition).
Expert Insight: Include a “termination for convenience” clause with reasonable notice, especially for long-term contracts.
Include Dispute Resolution and Jurisdiction Clauses
Action: Choose arbitration, mediation, or litigation and specify legal jurisdiction.
Tip: Common jurisdictions include Bangalore, Hyderabad, Delhi, and Mumbai (tech hubs).
Expert Insight: Arbitration with a neutral location and a qualified tech arbitrator speeds up resolution.
Add Indemnity and Limitation of Liability
Action: Define liability in cases of software failure, IP breach, data leaks, or non-performance.
Tip: Cap liabilities (e.g., “up to fees paid in the last 6 months”) and exclude indirect damages.
Expert Insight: Well-drafted limitation clauses help prevent exaggerated claims and financial shocks.
Ensure Regulatory and Industry Compliance
Action: Comply with applicable Indian IT laws (e.g., IT Act, DPDP Act), global standards, and sector-specific rules (e.g., fintech, healthtech).
Tip: Conduct due diligence for cross-border data transfer or cloud storage jurisdictions.
Expert Insight: Non-compliance with tech laws can result in fines, service bans, or criminal liability.
Get a Legal and Technical Review
Action: Consult legal and tech experts before finalizing the agreement.
Tip: Have both a legal advisor and a software architect/PM review the SOW and technical terms.
Expert Insight: Dual reviews ensure legal safety and technical feasibility, minimizing future conflicts.
Common mistakes to avoid
For Service Provider (Software/IT Service Agreement)
✅ Do's | ❌ Don'ts | Expert Tip |
Clearly define the project scope, requirements, and timelines. | Don’t make vague or unclear requests without specifying deliverables. | Use a written brief or scope document to align with the service provider before the project begins. |
Provide all necessary resources, data, and access needed for the service provider to perform. | Avoid changing the project scope mid-way without proper discussion and agreement. | Use a shared project management tool for smoother coordination and resource sharing. |
Communicate expectations and feedback promptly. | Don’t ignore or delay communication, especially on key decisions. | Schedule regular check-ins or review calls to stay aligned with progress. |
Make payments on time as per the agreement. | Don’t delay payments or fail to meet contractual terms. | Link payments to project milestones for better accountability. |
Respect the intellectual property rights of the service provider. | Don’t misuse or share the software or IP without proper authorization. | Ensure IP ownership and usage rights are clearly mentioned in the contract. |
For Client (Software/IT Service Agreement)
✅ Do's | ❌ Don'ts | Expert Tip |
Deliver the agreed-upon services on time and according to the specified quality standards. | Don’t overpromise or underdeliver on services or features. | Set realistic timelines and break the project into manageable phases. |
Communicate any project delays, issues, or challenges as soon as possible. | Avoid breaching confidentiality or sharing sensitive client information without consent. | Use NDAs and secure file-sharing tools to protect client data. |
Ensure data security and confidentiality for the client. | Don’t ignore client feedback or requests. | Document all changes and approvals through emails or collaboration tools. |
Provide ongoing support or maintenance as agreed in the contract. | Don’t violate any intellectual property rights, including using third-party code without proper licensing. | Keep a list of third-party libraries or tools used and verify their licenses. |
Be transparent about pricing, additional costs, and potential limitations. | Don’t add hidden charges or vague clauses in your invoices. | Offer detailed cost breakdowns and get written approval before extra work. |
Why DigiLawyer?
DigiLawyer simplifies the process of drafting legally verified Software/IT Service Agreements, ensuring both parties are protected throughout the engagement. Whether you need a standard template or customized clauses for delay in non-compete, non-solicit, or subcontracting, we make sure your agreement is tailored to your needs and fully compliant with the Indian Contract Act, 1872, and the Arbitration and Conciliation Act, 1996.
With DigiLawyer, you can draft your Software/IT Service Agreements in minutes—fast, simple, and legally sound. Our platform guides you through every step of the process, ensuring your business and contractors are protected.
With options for notarization, expert consultations, and 24/7 support, your business is fully protected. Ready to safeguard your information? Let DigiLawyer help you draft your Software/IT Service Agreements today!
Legally Approved Agreements - Drafted by legal experts, following all Indian laws.
Fast & Easy Process - Get your agreement online without any hassle.
E-Stamping & Registration Help - We take care of all legal formalities for you.
Customizable Agreements - Modify terms as per your business or personal needs.
Affordable & Transparent Pricing - No hidden charges, just clear and fair costs.
Secure Online Storage - Access your agreements anytime, anywhere.
Expert Legal Support - Our team is always available for legal guidance and dispute resolution.
FAQs Related to IT/Software Service Agreement
Key Terms Typically Covered in the Agreement:
- Service Scope and Deliverables - Defines the functional and non-functional requirements and project goals. This may include tasks such as optimizing website and mobile app load speeds, integrating APIs, setting up a cloud environment, and managing IT infrastructure.
- Roles and Responsibilities – Clearly distinguishes what the client must provide (e.g., access credentials, business logic, feedback) from what the service provider is expected to deliver (e.g., coding, bug fixes, deployment, maintenance).
- Timelines and Milestones – Outlines the phases of work (such as prototyping, testing, and go-live), delivery schedules, and procedures for handling delays or changes in scope.
- Payment Terms – Details hourly rates, fixed project fees, milestone-based payments, or retainer models. Also includes GST, payment cycles (e.g., payment due within 15 days of invoice), and penalties for late payments.
- Intellectual Property Rights – Specifies ownership of the final software, codebase, custom modules, and licenses. Typically, the client retains ownership of deliverables, while the provider retains rights to tools or frameworks used during development.
- Support and Maintenance – Describes post-launch services such as bug fixes, feature updates, helpdesk support, and issue resolution timelines (e.g., critical bugs to be resolved within 24 hours).
- Termination Clauses – Defines how either party can terminate the agreement in cases of non-performance, security breaches, delayed payments, or by mutual agreement (typically with 15–30 days’ notice).
- Indemnity and Liability – Addresses risks such as software failure, data loss, security breaches, or third-party IP violations. Liability is usually capped (e.g., limited to the total value of the contract).
- Confidentiality – Prohibits either party from disclosing sensitive information such as business logic, algorithms, infrastructure details, or proprietary data to third parties.
- Dispute Resolution and Jurisdiction – Explains how disputes will be resolved (e.g., negotiation, mediation, arbitration) and identifies the city or state whose legal jurisdiction will apply—typically based on the location of the client or service provider.
Risks You Avoid by Signing a Software/IT Service Agreement
- Unclear Deliverables or Scope Creep - Without a defined project scope (e.g., web portal with login, reports, and admin panel), the developer may charge extra for features you assumed were included or deliver incomplete functionality.
- IP Ownership Conflicts - If ownership of source code, frameworks, or product IP isn't clearly assigned, your business may not legally own the software you've paid for, restricting future upgrades, resale, or in-house use.
- Lack of Quality or Accountability - Without KPIs, coding standards, or testing protocols in writing, it's difficult to ensure performance benchmarks like uptime, speed, or bug-free operation resulting in poor user experience or reputational loss.
- Hidden or Unexpected Costs - In the absence of milestone-based billing, defined timelines, and approval cycles, your project budget can spiral out of control with unapproved add-ons or delays leading to higher costs.
- Data Breach or Security Gaps - If data handling, encryption, or security responsibilities are not defined, your business could be liable for customer data leaks or cybersecurity incidents resulting from vendor negligence.
- Breach of Confidentiality - You may be sharing business logic, system architecture, customer data, or proprietary algorithms without a proper NDA, such sensitive information can be reused, leaked, or even resold.
Yes, a Software Service Agreement is legally binding if it meets the basic requirements of a valid contract under the Indian Contract Act, 1872.
A Software Service Agreement is used when a company hires someone to build, modify, or maintain software just for them.
A SaaS Agreement is used when a company pays to use ready-made software online (like a subscription service), without owning or modifying it.
Yes, you can customize the agreement as per your requirements and needs.
Yes, but with some changes. A Software Service Agreement made under Indian laws can be used for international projects, but you should add clauses for cross-border payments, data protection (like GDPR), dispute resolution methods (like arbitration), and specify which country’s laws will apply.
If the service provider misses deadlines, the consequences depend on what's written in the agreement which generally includes Penalty clauses, project termination rights for the client, loss of payment or bonuses and Liability for damages caused by delays
No, a Software/IT Service Agreement does not need to be notarized to be legally valid in India. As long as it is signed by both parties and meets the essentials of a valid contract under the Indian Contract Act, 1872 is enforceable. However, notarization can serve as additional proof of execution and authenticity in case of disputes. It's optional but adds a layer of legal security.
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