Custom software development contract: Key things to include

The software development services agreements define the way the project is going to be developed & delivered and what the client and the software development company are going to receive after the completion of the entire project. Here in this blog, we will discuss it all and the things that need to be included in the agreement.

What is a Custom Software Development Contract?

Writing a software development contract is very essential for every software development process when an organization decides to hire software developers for the project. Such contracts enable both parties to differentiate the rights for the project.

Different Types of Software Development Contracts

There are various types of software development contracts that are used in the market. Some of them are -

1.Fixed Bid

The fixed bid is a type of contract where the scope must be delivered, and the fixed price is paid for it. This type of contract is best suited for small tasks vendors. Fixed bid contracts are most common on the freelancing platforms. Here the customers post the tasks to be done and the information about the price they are willing to pay. This approach can be used when you have a fixed plan on what you want to get created and what is your budget.

Besides this, when we talk about more extensive projects, a fixed bid contract may not be the perfect option. As in fixed bid agreements, one needs to have extremely detailed planning and more significant projects that can take a longer time.

2.Time & Materials

Time & material is one of the most commonly used software development outsourcing contracts. By signing this contract, the organization agrees to pay for the time the developer has worked for. The payment is mostly on an hourly basis.

While signing a time & materials contract, there are certain things that both parties should take into consideration. The approach of this contact clearly suggests that the business owner needs to pay more to the developers if the development of the project takes a longer time than expected. One can easily control the software development process if the Agile methodology is used.

3.Fixed Budget

The fixed budget contract is nothing but a variety to a fixed bid. Here the project budget can be decided before the start of the project, but the scope of the project can be changed during the development process. This type of contract’s primary goal is that the developer must work within the agreed budget and try to develop the software with a specified time.

The fixed budget contract may not always be the best choice for large-sized projects because it might need a specific product. But one of the benefits of this contract is that it will keep the budget tight.

Top 5 Things That Are Must Have in a Software Development Contract

1.Privacy Policy

Creating a privacy policy for the software development project is highly recommended and encouraged. The privacy of the end-users, the software development company, and the customer is important as no one wants to get their personal information stolen, sold, or leaked. Therefore adding the privacy policy in the custom software development contract is a must. It can hold many proprietary data sets like sensitive data, private customer data, and projects.


This is a complicated concept to set up the perfect language in the project and the documentation. The product must be multilingual as different people from different regions are going to use it. In addition to this, one needs to add Google translate in the product to shift from the default language to any other language the users want. Besides this, language plays an important part when writing the documentation and the contract. And the other thing is that a software developer needs to have a decent conversation in the language that the client is comfortable with.

3.Tools & Processes

One of the most important things to mention in the custom software development contract is the details about tools and processes. The contract will have a list of the software development tools that are going to be used in the project, the source code repositories, schedules, project management styles, and bug tracking software. All these things must be included in the contract as it might not be precisely clear in the initial discussions.

4.Pricing & Billing

Pricing and billing is the one thing that must be clearly described in the contract to avoid any issues in the software development and deployment process. There can be a lot of software developers, quality assurance experts, and a project manager to be paid. Therefore the software development company and the business owner should specify all the payment details.

5.Success Metrics

Another aspect that needs to be added to the contract is the expected success metrics. It specifies the details that the project is supposed to be and what will be the milestones. It is necessary to use perfect language to avoid misunderstanding in achieving the goal.


The above-listed points are some of the most critical aspects that need to be involved in the custom software development contract to make the development process clear between both parties. There are many templates available for it, the software development company can choose from it and discuss with the business owners about the contract. Once both parties sign the agreement, the development process begins.

You can also read:

  1. What is Offshore Software Development? Advantages and Disadvantages
  2. Uncover why Enterprise Software Development is a sturdy choice for Businesses?
  3. Know the Relevance of Code Quality in Custom software development

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