Search AIIA.biz:

Risks of not having a Licence

One of the key reasons to have a software licence agreement is that it describes and allocates the risks between the parties when the customer uses the software.

Depending on the nature of your software product these risks may be significant. For example, if your software program is designed to assist with derivatives trading, then the consequences of failure of your software on the customer are significant. If the customer was able to pursue the software supplier for any losses that the customer made by incorrectly trading derivatives, then the software supplier would very likely be in a unprofitable business or potentially worse, go into bankruptcy, if those losses were passed back to the software supplier.

Software companies provide software licences at a price which provides them with a reasonable return on investment, and exposing the software supplier to risks which jeopardise that margin is inappropriate. Accordingly, one of the most important issues that software licence should deal with is what the consequences are for each party if the software does not work. Without a software licence the software supplier will accept unlimited liability and will be responsible for any losses that the customer is able to claim at law. Clearly, having a contract which provides for the supplier to have a limited liability is essential to the protection of the supplier’s business.

A second good reason to have a software licence is that it is a good mechanism to be able to enforce the payment obligation of your customer. Having a clearly drafted contract that sets out not only the amount that is to be paid and how it is calculated but also when the payment is due, together with default interest payments if payment is not received by the due date are essential provisions in ensuring that payment is able to be received by the software supplier.

Simple issues such as whether the price includes or excludes GST are essential to avoid “inadvertently” providing a 10% discount on the fee, simply because the parties were not clear as to whether the price that was quoted was inclusive or exclusive of GST.

Next: learn about the Key Commercial Issues. Note that this is Premium Content, and you must be an AIIA Member, and logged in to the site, to view.

Legal Protection for Software Licence Rights & Pricing Booking Revenue Risks of not having a Licence Key commercial issues Tips to make money

Master Perpetual Software Licence & Support Agreement Master Periodic Software Licence & Support Agreement Master Support Agreement Trial Licence

Cart (0 item)

Total: $0.00 AUD

Which contract is best for me?

Clicking on the link to one of the specific online Contract Templates listed on this page will give you a description of when that particular contract should be used, and help you decide if it is the right document for your needs.

You should choose the online Contract Template that most closely describes the way you provide your software licences and support to the customer.