Software Development Agreements in Germany

The flip side of agile software development, however, is the uncertain legal situation in Germany that exists due to the lack of legal guidelines and case law in this area. The initial planning phase is deliberately reduced in agile software development methods. The parties involved often initially define the scope of the project only in broad outlines and only agree on the individual services in the course of the development phase.

For this reason, however, disputes among the project participants often arise afterwards, as disagreements regarding the announced subject of agreement only come to light during the development phase. This problem can only be addressed by thorough drafting of a software developer agreement.

The essential regulation points of a standard software development contract are:

• the subject of agreement,
• the distribution of roles,
• the remuneration and
• the granting of rights of use.

In order to avoid disputes, the parties involved are advised to determine a concrete subject of agreement in advance - despite a reduced planning effort. Furthermore, it should be clarified whether a pure activity (development of software) or the provision of a certain result (completed software developed according to certain specifications) is owed. This depends on whether the contract is considered a

• service contract,
• contract for work or
• a mixed-type contract

for classification purposes.

Depending on which of the agile software development methods has been chosen, the participants take on different roles in the software development project. A clear distribution of roles among the participants is essential, since certain tasks and, in particular, responsibilities are associated with the respective role assignment. The specific distribution of roles is to be specified in the software development agreement.

Another frequent point of contention between the parties involved concerns the remuneration to be paid, as the actual scope of services and the associated project costs can only be comprehensively determined at a later date. Therefore, it is necessary to contractually agree on an appropriate remuneration, i.e. a remuneration that is adapted to the constantly increasing scope of services and is aligned with the interests of the company.

In practice, we often see that project participants overlook the need to regulate the rights of use for the software although this is a significant concern. A common misconception in software development is the assumption that the customer automatically becomes the owner of the software. However, the developer, as the author, receives all rights to the software by operation of law.

To what extent and at what time the customer may use the software they have personally commissioned for themselves and whether they may also make the software available to third parties for use must first be regulated by granting the rights of use.

Due to the existing legal uncertainty in Germany, drafting a custom software development agreement that is as comprehensive and clear as possible is the safest way to prevent disputes between the project participants. However, protracted agreement negotiations risk losing the time that was gained through reduced planning in advance. The intended acceleration of the development process is inhibited. In addition, the creation of a rigid list of requirements that precisely defines the services to be rendered in advance is at odds with the high degree of flexibility that makes agile software development so attractive.

In order to nevertheless achieve legal security without losing the advantages of agile software development, the creation of a framework agreement presents itself as a solution. In such an agreement, the basic framework conditions of the cooperation between the project participants are regulated. This includes the above-mentioned essential regulatory points. Individual contracts are then concluded with reference to this framework agreement. These clarify the issues that need to be regulated in the course of the individual project phases.

The type of contract shall define how the liability for software development projects is structured in detail. Because the performance of a certain degree of success is obligated in the case of a contract for work, the customary liability regime is supplemented by the existence of warranty rights. This means that the client is entitled to additional rights in the event of development of defective software, such as, for example, the right to

• subsequent fulfilment,
• self-remedy or
• reduction of remuneration.

In the case of a service contract, however, the customer is not entitled to these warranty rights.